Front Matter Page
Statistics Department
Contents
Summary
I. Introduction
II. Theoretical Issues
1. The concept of income
2. Financial account offsets
3. Calculation of accrued interest
III. Practical Considerations
1. Introduction
2. International transaction reporting systems
3. Enterprise surveys
4. Official sources
5. Yield analysis
Appendix
References
Summary
In the balance of payments, as well as the national accounts, income (which is recorded in the current account) refers to the use of factors of production, rather than the return to the owners of these factors of production. However, the latter definition can be used to value (and describe) the former. Accordingly, the paper suggests that income should be recorded in the balance of payments during the period or periods in which the economic benefits arising from the use of a factor of production are enjoyed by the user, that is, on an accrual basis. Interest, which represents the use of capital, should be recorded on a continuous basis—not just at the moment that interest is actually paid.
In order to satisfy the requirements of the double-entry accounting system, which is used in balance of payments statistics, it is necessary to record in the financial account entries for income accrued but not paid in a period. These entries, which represent a claim by the creditor on the debtor, should generally be classified to the instrument underlying the accrued interest.2/
For floating–rate nontradable debt and all tradable debt, prevailing interest rates should, in theory, be used to calculate accrued interest. For fixed-rate debt, the rate specified in the contract should be used.
The paper notes that, regardless of the source or method used to measure interest income, the results will often be inconsistent with the accrual method of recording. The statistical compiler can attempt to change the nature of the source to better align with conceptual requirements. If this is not possible, the compiler should attempt to adjust the results to a basis that is more consistent with these requirements. For the most part, results from the main sources traditionally used to measure interest income will require adjustment only in exceptional cases, such as deep-discounted or zero—coupon bonds. The information for such adjustments could come from supplementary inquiries, or from information already possessed by the compiler.
An exception is interest in arrears. The claims and liabilities for such interest should be recorded as a separate instrument.