Acquisition: A business transaction between unrelated parties based on terms established by the market where each enterprise acts in its own interest. The acquiring enterprise purchases the assets and liabilities of the target enterprise. In some cases, the target enterprise becomes a subsidiary or part of a subsidiary of the acquiring enterprise.
Activity of multinational enterprise statistics: Structural business statistics that provide data on the operations of foreign-controlled and foreign-controlling enterprises, such as gross output, turnover, value added, number of people in employment, employee compensation, gross operating surplus, gross fixed capital formation, R&D expenditures, number of researchers, total exports and imports, intra-company exports and imports, and technological payments and receipts.
Affiliated entities: Enterprises in an immediate or indirect direct investment relationship with each other or that have the same immediate or indirect direct investor. Affiliates of an enterprise thus consist of its immediate or indirect direct investor(s), its immediate or indirect direct investment enterprise(s) and its fellow enterprise(s).
All-inclusive concept: One of two main approaches to measuring earnings. It is an accounting method where all gains and losses, including those caused by extraordinary and non-recurring items, are reported on the company’s income statement. It includes all changes in equity during a period except those resulting from investment by owners and distributions to owners. Also called comprehensive income. This concept is not recommended by the Benchmark Definition (see also entry on Current Operating Performance Concept).
Ancillary corporation: Wholly owned subsidiary whose productive activities are confined to providing services to the parent corporation or other affiliates owned by the same parent corporation.
Assets, Direct investment: Direct investment assets are claims of a resident entity on a non-resident entity when there is a direct investment relationship between them. Direct investment assets consist of equity and debt and can be attributed to the following three categories:
investment by resident direct investors in non-resident direct investment enterprises
reverse investment by resident direct investment enterprises in non-resident direct investors
investment by resident fellow enterprises in non-resident fellow enterprises.
Asset/liability presentation: The approach used to present standard components related to direct investment where investment is organised according to whether it relates to an asset or liability. Data presented according to this principle do not incorporate any offsetting of reverse direct investment transactions or positions in equity or debt between a direct investment enterprise and its direct investor. Similarly, the asset/liability presentation does not incorporate any offsetting of any transactions or positions between fellow enterprises. See directional principle for an alternative presentation of direct investment data.
Associates: Enterprises over which the direct investor is able to exercise a significant degree of influence but not control, mainly by owning 10% to 50% of voting power. Associates are a subset of affiliates and could also refer to domestic relationships. Associates include enterprises:
in which an investor owns directly at least 10% of the voting power and no more than 50%
where an investor and its subsidiaries combined own at least 10% of the voting power of an enterprise but no more than 50%
where an associate, either as an individual or in combination with its subsidiaries, own more than 50% of an enterprise, this enterprise is regarded for FDI purposes as an associate of the higher- level investor.
Balance of payments: Statement that summarises economic transactions between residents and non-residents during a specific time period. It consists of three main accounts: (i) the current account (which includes the goods and services account, the earned income account, and the transfer income account), (ii) the capital account, and (iii) the financial account. The IMF Integrated Balance of Payments and International Investment Position Manual, Seventh Edition provides guidance for compiling balance of payments statistics according to internationally agreed guidelines.
Bilateral asymmetries: Data discrepancies when inward FDI positions or transactions reported by economy A from economy B do not equal outward FDI positions or transactions reported by economy B to economy A.
Book value: Valuation used in business accounts, generally referring to the value recorded in the enterprise’s records. Book values may have different meanings because their values are influenced by the timing of acquisition, company takeovers, frequency of revaluations and tax and other regulations, including national practices.
Branches of non-resident corporation: Resident unincorporated enterprises that fully belong to a non-resident unit, known as the parent, which undertakes production of goods and services on a significant scale. It is treated as a resident quasi-corporation in the territory where it is situated.
All or most of the following features should be present for a branch to be recognised:
undertaking or intending to undertake production on a significant scale based in the territory for one year or more in a territory other than that of its head office:
a. If the production process involves physical presence, then the operations should be physically located in that territory. Some indicators of an intention to locate in the territory include purchasing or renting business premises, acquiring capital equipment, and recruiting local staff.
b. If the production does not involve physical presence, such as in some cases of banking, insurance, or other financial services, the operations should be recognised as being in the territory by virtue of the registration or legal domicile of those operations in that territory.
the recognition of the operations as being subject to the income tax system, if any, of the economy in which it is located even if it may have a tax-exempt status.
Business register: A list of enterprises or establishments maintained by statistical offices to assist in the compilation of their business and macroeconomic statistics in general and that can identify those enterprises involved in foreign direct investment and, thus, help in the compilation of these statistics.
Capital transfers: Unrequited transfers, either in cash or in-kind, linked to the acquisition, disposal or transfer of an asset (other than cash or inventories); or where a liability is forgiven or assumed; or where the transfers are intended to address accumulated losses incurred over a multi-year period.
Captive financial institutions: Institutional units providing financial services, where most of either their assets or liabilities are not transacted on open financial markets. They usually act as a financial agent for their affiliates, raising funds for lending to their affiliates or for purchase of their affiliates' assets.
Cash-pooling arrangement: Financial arrangement where multiple bank accounts are consolidated into a single account, allowing efficient cash management, liquidity optimisation, and centralised control over funds within an enterprise group.
Centre of predominant economic interest: An institutional unit has a centre of predominant economic interest in an economic territory when there exists, within the economic territory, some location, dwelling, place of production, or other premises on which or from which the unit engages and intends to continue engaging, either indefinitely or over a finite but long period of time, in economic activities and transactions on a significant scale. Actual or intended location of one year or more is used as an operational definition.
Collective investment institutions (CIIs): Incorporated investment companies and investment trusts, as well as unincorporated undertakings (mutual funds or unit trusts), that invest in financial assets (mainly marketable securities and bank deposits) and real estate using the funds collected from investors by means of issuing shares/units (other than equity). Also referred to as collective investment scheme, collective investment vehicle, or investment fund.
Conduit: Unit that principally raises funds on open financial markets for passing on to other affiliated enterprises. Conduits are a subset of captive financial institutions. Some conduits and holding companies may have a substantial physical presence as evidenced by office building, equipment, employees, etc. Others may have little or no physical presence and may exist only as shell companies.
Confidentiality: In many countries, national statistical legislation prohibits the direct or indirect disclosure of information relating to a particular individual or entity. In presenting FDI statistics, compilers in these countries may encounter confidential data in the results to be disseminated. Such information generally does not directly identify the entity, e.g., the name and address of an enterprise, to which these data relate. However, the particular context in which data are presented (e.g., classification by partner economy, sector of economic activity of enterprise, or type of financial instrument as well as cross-classifications of these attributes) may allow users to determine the identity of the entity in question and the value of its activity from the information provided.
Consolidated financial statements: Statements in which the assets, liabilities, net worth, revenue, expenses and cash flows of a controlling entity and its controlled entities are presented as those of a single economic entity.
Control of a corporation: Ability to determine general corporate policy of a corporation, where general corporate policy is understood in a broad sense to mean the key financial and operating policies relating to the corporation’s strategic objectives as a market producer. In practice, control is determined to exist if an investor has more than 50% of the voting power in an enterprise. The control may be direct (through ownership of voting power or other arrangements) or indirect (through ownership of enterprises that in turn have voting power). In the case of control by government, or another public unit, control can also be exercised in other ways than owning more than half of the voting power.
Corporate and financial restructuring: Intra-group transfer of existing FDI equity to existing or newly created subsidiaries without any major impact on the productive activities of the group, and/or use of equity instruments for loss reduction and debt repayment.
Corporate inversion: The corporate restructuring of a multinational enterprise group such that the original ultimate controlling parent company in one economy becomes a subsidiary of the new parent in another economy. In addition, ownership of a group of enterprises may be shifted to the new parent company.
Corporations: Institutional units, mainly consisting of independent legally constituted corporations and also cooperatives, limited liability partnerships, notional resident units and quasi-corporations, whose principal activities are to produce goods or services for the market.
Credits/revenues: Transactions related to exports of goods and services, earned income receivable, transfer income receivable, and disposals of non-produced non-financial assets.
Currency union: A group of economies that adopts a common currency and has a central decision-making body (usually a currency union central bank) with the authority to issue the legal tender of the area and conduct a single monetary policy.
Current operating performance concept (COPC): Concept recommended by the Benchmark Definition to measure direct investment earnings. When earnings are measured according to this concept, such earnings consist of income from normal enterprise operations excluding non-recurring items (such as write-offs) and holding gains and losses and with depreciation measured on a current replacement cost basis (see also entry on All-inclusive concept not recommended by the Benchmark Definition).
Current transfers: Unrequited transactions between two parties where one party provides a good, service or cash to the other party, with no expectation of anything of economic value in exchange. Unlike capital transfers, they are not linked to the acquisition or disposal of an asset, either financial or non-financial (other than cash and inventories).
Debits/expenditures: Transactions related to imports of goods and services, earned income payable, transfer income payable, and acquisitions of non-produced non-financial assets.
Debt instruments: Financial instruments that require the payment of principal and/or interest at some point(s) in the future. Debt instruments consist of special drawing rights, currency and deposits, debt securities, loans, insurance technical reserves, pension and related entitlements, provision for calls under standardised guarantees, and other accounts receivable/payable.
Debt securities: Negotiable instruments serving as evidence of a debt. They include bills, bonds, notes, negotiable certificates of deposit, commercial papers, debentures, asset-backed securities and similar instruments normally traded in financial markets.
Debtor/creditor basis: Approach used for the compilation of partner economy data where (changes in) assets are shown according to the residence of the debtor (or issuers of non-debt instruments), and (changes in) liabilities according to the residence of the creditor (or holders of non-debt instruments). For FDI statistical purposes, under the debtor/creditor principle, the FDI assets (both transactions and positions) of the compiling economy are allocated to the economies of residence of the non-resident debtors, and its FDI liabilities are allocated to the economies of residence of the non-resident creditors. This principle, recommended by the Benchmark Definition as the basis for geographical disaggregation, differs from the transactor principle.
Deposits: Non-negotiable contracts that represent the placements of funds available for later withdrawal. They are claims on the central bank, other deposit taking corporations, other financial corporations, and, in some cases, other institutional units.
Direct Investment: (see Foreign Direct Investment).
Direct investment enterprise: An enterprise in one economy subject to control or a significant degree of influence by a direct investor that is resident in another economy. Ownership of 10% or more of the voting power is evidence of a direct investment relationship. An exception is made for investment funds, which cannot be direct investment enterprises as investments in negotiable investment fund shares are always considered to be portfolio investment or reserve assets. Investments in non-negotiable investment funds shares are included in other equity and equity in international organisations. The direct investor can own its voting power either directly or indirectly.
Direct investor: An entity or group of related entities that is able to exercise control or a significant degree of influence over another entity that is resident of a different economy. Ownership of 10% or more of the voting power is evidence of a direct investment relationship. The direct investor can own its voting power either directly or indirectly.
A direct investor could be classified to any institutional sector of the economy and could be any of the following:
an individual
a group of related individuals
an incorporated or unincorporated enterprise
a public or private enterprise
a group of related enterprises
a government body
an estate, trust or other societal organisation
any combination of the above.
Directional presentation: Presentation of the FDI data on a directional basis reflects the direction of influence by the direct investor underlying the direct investment: inward or outward direct investment. FDI according to directional principle relates to the treatment of reverse investment and to the treatment of fellow enterprises.
Reverse investment is categorised as outward investment if the direct investor is resident and as inward investment if the direct investor is non-resident.
Investment between fellow enterprises:
If the ultimate controlling parent is a resident of the compiling economy, then the transactions and positions between the two fellow enterprises are categorised as outward foreign direct investment;
if the ultimate controlling parent is not a resident of the compiling economy, then the transactions and positions between the two fellow enterprises are categorised as inward foreign direct investment.
See entry on asset/liability presentation for an alternative presentation of direct investment data.
Distributable income of a corporation: Entrepreneurial income, plus all current transfers receivable, less all current transfers payable, and less the adjustment for the change in pension and non-pension entitlements relating to the pension or other social insurance scheme of that corporation.
Dividends: Earnings distributed to the owners of corporate equity for placing funds at the disposal of corporations. Dividends exclude liquidating dividends and bonus shares (which are dividends in the form of additional shares of stock). These can be recorded on the date they are payable, on the date they are paid, or at some other point in time. The Benchmark Definition recommends recording dividends on the date they are payable.
Domestic enterprise group: Parent corporation and the legal entities controlled by that parent that are resident in the reporting economy.
Earned income: Income earned by institutional units as a consequence of their involvement in processes of production or ownership of assets that may be needed for purposes of production.
Economic activities: Activities covering production and consumption of goods and services, distribution and redistribution of income, and accumulation of economic assets.
Economic appearance of assets: Appearance of assets that is neither due to transactions nor due to holding gains and losses (revaluations). Examples relate to the recognition of produced assets, not previously recognised as assets; discoveries of natural resources; changes in the quality of land; the recognition of goodwill in the purchase of a corporation; and the initiation of contracts, leases and licenses.
Economic disappearance of assets and liabilities: Disappearance of assets and liabilities that is neither due to transactions nor due to holding gains and losses (revaluations). Examples relate to the cancellation of contracts, leases and licenses, and the unilateral cancellation or write-offs of debt.
Economic territory: A geographic area under the effective economic control of a single government or a currency union or economic union. In its broadest sense, an economic territory can be any geographic area or jurisdiction for which statistics are required. For a country, it includes the land area, airspace, territorial waters, islands that belong to the territory and territorial enclaves in the rest of the world.
Economic union: A group of economies established by means of an intergovernmental legal agreement among sovereign countries or jurisdictions with the intention of fostering greater economic integration.
Enterprise: An institutional unit engaged in the production of goods and/or services. The term enterprise may refer to a corporation, a quasi-corporation, a non-profit institution, or an unincorporated enterprise.
Entrepreneurial income: Income earned by corporations from the production of goods and services, plus property income receivable, minus property income payable (excluding dividends, withdrawals from income of quasi-corporations and reinvested earnings).
Equity: All instruments and records acknowledging rights and claims on the residual value of a corporation or quasi-corporation after the claims of all creditors have been met. Ownership of equity is usually evidenced by shares, stocks, participations, depository receipts or similar documents. Equity capital comprises: (i) equity in branches; (ii) all shares in subsidiaries and associates (except non-participating, preferred shares that are treated as debt securities and included under direct investment, debt instruments); and (iii) other contributions of an equity nature. This category includes proprietors’ net equity in quasi-corporations, as well as shares and equity in corporations. It also includes preferred stocks or shares that provide for participation in the residual value on dissolution of an incorporated enterprise. Reinvestment of earnings comprises the claim of direct investors (in proportion to equity held) on the retained earnings of direct investment enterprises. Reinvestment of earnings represents financial account transactions that contribute to the equity position of a direct investor in a direct investment enterprise.
Establishment: Enterprise, or part of an enterprise, that is situated in a single location and in which only a single productive activity is carried out, or in which the principal productive activity accounts for most of the value added (also known as local kind-of-activity unit).
Exchange rate changes: All changes in value resulting from exposure to the effect of exchange rates. Part of revaluations along with other price changes. Exchange rate changes may be referred to by enterprises as realised or unrealised exchange rate or foreign exchange gains or losses. They should not be included in the earnings of an enterprise when calculating income transactions.
Extension of capacity: Capital injections that are used to expand the capacity of direct investment enterprises that have existed for three years or more.
Fellow enterprises: Enterprises under the influence or control either directly or indirectly of the same direct investor, but neither of the fellow enterprise controls or influences the other enterprise. This 'common parent' must be a direct investor in at least one of the enterprises in question. It should be noted, however, that for FDI statistics, only cross-border transactions and positions between FDI-related enterprises should be recorded. Such enterprises can be considered to be related through a ‘horizontal’ linkage within the framework for direct investment relationships.
Finance lease: Contract between a lessor and a lessee, under which the lessor, as legal owner of an asset, substantially conveys the risks and rewards of ownership of the asset to the lessee. The lessee, therefore, becomes the economic owner of the asset. A finance lease involves imputing a loan.
Financial derivatives: Negotiable financial instruments linked to another specific financial instrument, indicator, or commodity, through which specific risks (e.g., interest rate risk, foreign exchange risk, equity and commodity price risk, credit risk) can be traded in their own right in financial markets. Financial derivatives are excluded from direct investment.
Financial intermediaries: Financial corporations that incur liabilities on their own account for the purpose of acquiring financial assets by engaging in financial transactions on the market. Financial intermediaries consist of (i) central bank; (ii) deposit-taking corporations other than central bank (e.g. banks); (iii) money market funds; (iv) investment funds other than money market funds; (v) other financial intermediaries, except insurance companies and pension funds; (vi) insurance corporations and (vii) pension funds. However, for the purposes of excluding debt between related financial intermediaries, insurance corporations and pension funds are not considered “financial intermediaries”.
Fines and penalties: Compulsory payments imposed on institutional units by courts of law or quasi-judicial bodies.
Flows: Transactions and other flows reflecting the creation, transformation, exchange, transfer, or extinction of economic value; they typically involve changes in the volume, composition, or value of an institutional unit’s assets, liabilities and net worth.
Foreign-controlled corporation: Corporation that is controlled by a non-resident unit and produces goods and/or services for the market.
Foreign direct investment (FDI): Category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy. Ownership of 10% or more of the voting power is evidence of a direct investment relationship. FDI reflects the objective of establishing a long-term relationship between the direct investor and the direct investment enterprise.
Foreign direct investment income: Investment income arising from direct investment positions between resident and non-resident institutional units. It is part of the return on the direct investment position; that is, the return on equity and debt investment. Foreign direct investment income consists of earnings on equity investment (for example, a resident direct investor’s share in the net income or earnings of its direct investment enterprises) plus income on debt between direct investors and direct investment enterprises and between fellow enterprises. Direct investment income is recorded as it accrues. As debt instruments involving FDI-related financial intermediaries are excluded from direct investment, so is the debt income between them.
Framework for direct investment relationships (FDIR): A generalised methodology for identifying and determining the extent and type of direct investment relationships. The FDIR allows compilers to determine the population of direct investors and direct investment enterprises to be included in FDI statistics.
A direct investment relationship arises when an investor resident in one economy makes an investment that gives control or a significant degree of influence on the management of an enterprise that is resident in another economy. All enterprises that are under the control or influence of the same direct investor are considered to be in a direct investment relationship with each other. Ownership of 10% or more of the voting power is evidence of a direct investment relationship.
The residence of units is not a feature of the definition of subsidiaries and associates for FDI purposes. The FDIR may include within the relationship enterprises that are resident in the same economy. However, foreign direct investment is only recorded when there is a financial transaction or position between entities in different economies that are in a direct investment relationship (including fellow enterprises).
Functional categories in the external accounts: Primary classification used for each of financial transactions, positions, and income in the external accounts. Five functional categories of investment are distinguished in the external accounts: (a) direct investment; (b) portfolio investment; (c) financial derivatives (other than reserves) and employee stock options; (d) other investment; and (e) reserve assets. The functional categories are designed to facilitate analysis by distinguishing categories that exhibit different economic motivations and patterns of behaviour.
Greenfield investment: Investment in direct investment enterprises established within the last three years.
There are three methods to estimate greenfield investment and extensions of capacity. The transactions approach identifies FDI financial transactions to direct investment enterprises established within the last three years and capital injections that are used to expand the capacity of direct investment enterprises that have existed for more than three years. A related approach, the residual approach, identifies other types of FDI financial transactions (e.g., M&A and corporate and financial restructuring) and derives the estimate of greenfield investment and extensions of capacity by subtracting these from total FDI transactions. The capital approach measures the gross fixed capital formation of newly established direct investment enterprises and the extension of capacity of existing direct investment enterprises.
Gross fixed capital formation: Acquisitions less disposals of fixed assets during the accounting period, including certain specified expenditures on services that add to the value of non-produced assets.
Gross national income: Total income earned by all residents within an economic territory during an accounting period. It is equal to gross domestic product plus earned income receivable from abroad minus earned income payable abroad.
Holding company: Institutional unit that holds the assets (owning controlling-levels of equity) of a group of subsidiary corporations and whose principal activity is owning the group. Holding companies do not provide any other service to the enterprises in which the equity is held, i.e., they do not administer or manage other units.
Holding gains and losses – realised: The amount of holding gains (losses) that has been realised as a consequence of the relevant assets being sold, redeemed, used or otherwise disposed of, or liabilities being repaid.
Holding gains and losses – unrealised: The amount by which the value of assets or liabilities increases (decreases), without being realised through sale, redemption, use, disposal, or repayment.
Immediate investor: The first non-resident investor for direct investment.
Income on debt: Interest receivables comprising interest accruing to residents (direct investors, direct investment enterprises and fellow enterprises) on their debt receivables, and interest payables comprising interest accruing to non-residents (direct investment enterprises, direct investors and fellow enterprises) on debt payables. No direct investment interest receivables or payables are recorded when both parties are related financial intermediaries.
Income on equity: Sum of dividends paid to owners of corporate equity and withdrawals from the income of quasi-corporations and reinvested earnings on foreign direct investment. Income on equity relates to the return of the direct investor on the equity component of the direct investment position. The amounts are based on the direct investor’s percentage share (based on their equity share) in the current earnings of the given direct investment enterprise and consist of distributed earnings and reinvested earnings.
Indirectly owned direct investment enterprises: When a direct investor owns the direct investment enterprise indirectly, i.e., through ownership of enterprises that in turn have voting power in the direct investment enterprise. This group of enterprises is specified according to the framework for direct investment relationships (FDIR)
Institutional sector: Group of similar kinds of institutional units according to their principal functions, behaviour and objectives.
Institutional unit: An economic unit that is capable, in its own right, of owning assets, typically able to incur liabilities and engaging in economic activities and in transactions with other units.
Integrated foreign direct investment position: Reconciliation of the opening and closing values of the foreign direct investment positions through the financial account (flows arising from transactions) and the other changes in financial assets and liabilities account (revaluations and other volume changes).
Integrated international investment position: Reconciliation of the opening and closing values of the international investment position through the financial account (flows arising from transactions) and the other changes in financial assets and liabilities account (revaluations and other volume changes).
Inter-company lending: Direct investment debt positions or flows between affiliated enterprises.
International investment position: Statement that shows at a particular point in time of the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and of the liabilities of residents of an economy to non-residents.
International Standard Industrial Classification of all economic activities (ISIC): Classification based on the principal productive activity, used for classifying producers by economic activity. It is the industrial classification recommended by the Benchmark Definition.
International transactions reporting system (ITRS): A data collection system that obtains data from banks and companies at the level of individual transactions. The most comprehensive ITRS measures: (i) cash transactions with non-residents that pass through domestic banks; (ii) cash transactions that pass through enterprise accounts with banks abroad; (iii) transactions on inter-company accounts with non-resident companies; (iv) positions; and (v) non-cash transactions. Statistics are compiled from information submitted to/by domestic banks and from information submitted by companies.
Investment income: Income receivable by the owner of a financial asset in return for providing funds to another institutional unit.
Inward direct investment: All direct investment liabilities less assets between resident direct investment enterprises and their direct investors. It also covers all direct investment liabilities less assets between resident and non-resident fellow enterprises if the ultimate controlling parent is non-resident. Also referred to as direct investment in the reporting economy.
Joint venture: A contractual agreement between two or more parties for the purpose of executing a business undertaking in which the parties agree to share in the profits and losses of the enterprise as well as the capital formation and contribution of operating inputs or costs. It is similar to a partnership, but typically differs in that there is generally no intention of a continuing relationship beyond the original purpose. A joint venture may not involve the creation of a new legal entity. Whether a quasi-corporation is identified for the joint venture depends on the arrangements of the parties and legal requirements. The joint venture is a quasi-corporation if it meets the requirements for an institutional unit, particularly by having its own records. Otherwise, if each of the operations is effectively undertaken by the partners individually, then the joint venture is not an institutional unit, and the operations would be seen as being undertaken by the individual partners to the joint venture. Because of the ambiguous status of joint ventures, there is a risk that they could be omitted or double-counted, so particular attention needs to be paid to them.
Land: Ground, including the soil covering and any associated surface waters, over which ownership rights are enforced and from which economic benefits can be derived by their owners by holding or using them. The value of land excludes any buildings or other structures situated on it or running through it; cultivated crops, trees and animals; mineral and energy resources; non-cultivated biological resources and water resources below the ground. The associated surface water includes any inland waters (reservoirs, lakes, rivers, etc.) over which ownership rights can be exercised and that can, therefore, be the subject of transactions between institutional units. However, water bodies from which water is regularly extracted, against payment, for use in production (including for irrigation) are included not in water associated with land but in water resources.
Ownership of land and buildings by a non-resident is treated as an equity investment by the non-resident in a resident notional enterprise, which in turn is treated as the owner of the land and buildings. Any rent earned through leasing the land and buildings is recorded as a dividend (income on equity) paid by the notional unit to the direct investor.
Liabilities, Direct investment: Direct investment liabilities are obligations of a resident entity to a non-resident entity when there is a direct investment relationship between them. Direct investment liabilities consist of equity and debt and can be attributed to the following three categories:
investment of non-resident direct investors in resident direct investment enterprises
reverse investment of non-resident direct investment enterprises in resident direct investors
investment of non-resident fellow enterprises in resident fellow enterprises.
Liquidating dividends: Dividends payable to shareholders as a result of an enterprise becoming bankrupt, after settling all other obligations.
Listed shares: Equity securities listed on an exchange (also known as quoted shares). A market value can be determined by multiplying the number of shares held by the direct investor(s) by the most recent bid/ask prices or at the price at which the shares were last traded. Usually, the equity securities of only a relatively small portion of direct investment enterprises are listed shares because most direct investment enterprises are either wholly owned by the direct investor or are held by a small group of investors.
Loans: Financial assets that are created when a creditor lends funds directly to a debtor and are evidenced by documents that are not negotiable.
Market capitalisation method: Valuing the unlisted equity in an enterprise by applying the ratio of the stock exchange market capitalisation to the “own funds at book value” of comparable listed enterprises to the own funds at book value of the equity in the unlisted enterprise.
Market value (or Market price): Amounts of money that willing buyers pay to acquire something from willing sellers. Exchanges are made between independent parties and on the basis of commercial considerations only - sometimes called “at arm’s length”. Market value is the conceptually ideal basis for valuing direct investment transactions and positions. Market valuation places all assets at current prices rather than when last purchased or re-valued and promotes consistency in the value of assets of different vintages. It also promotes consistency when comparing positions, transactions and other flows of different enterprises, industries, and countries.
Memorandum items: Additional items of special analytical interest, which are added to the presentation, but do not have an impact on the totals and balancing items that can be derived from the macroeconomic system.
Merger: When two or more companies agree to combine into a single operation.
Metadata: Systematic, descriptive information about data content and organisation, providing information on the concepts, sources and methods underlying the data and therefore help users to understand and assess the characteristics of the data. Metadata can also help when comparing the same statistics from different producers.
Multinational enterprise: Legal entity that has at least one non-resident affiliate or branch, and exercises control over its affiliate(s) or branch(es) either directly—by having over 50% of the voting power in the unit—or by indirect transmission of control. The multinational enterprise is the ultimate controlling parent—the direct investor at the top of the control chain.
Multinational enterprise group: The multinational enterprise and the set of legal entities—regardless of their economies of residence—that are under the control of the same ultimate controlling parent. Also called a global enterprise group.
Multi-territory enterprise: Enterprise that operates as a seamless operation over more than one economic territory. Although the enterprise has substantial activity in more than one economic territory, it is run as an indivisible operation with no separate accounts or decisions, so that separate branches cannot be identified. Such enterprises may have operations such as shipping lines, airlines, hydroelectric schemes on border rivers, pipelines, bridges, tunnels, and undersea cables.
Net asset value: Valuation method for unlisted equity, by using total assets at current value less total liabilities (excluding equity) at market value.
Net worth: The value of an institutional unit's assets less the value of its outstanding liabilities (including shares and other equity).
Nominal value: Outstanding amount the debtor owes to the creditor, which is composed of the outstanding principal amount including any accrued interest.
Non-profit institutions (NPIs): Legal or social entities created for the purpose of producing goods and services but whose status does not permit them to be a source of income, profit, or other financial gain for the units that establish, control, or finance them.
Notional resident unit: Institutional units identified for statistical purposes to be the resident owner of immovable assets legally owned by non-residents. Immovable assets, such as land and buildings, can only be used for production in the territory in which they are located. Therefore, the land and buildings and other structures owned by a non-resident are always treated as being owned by a resident notional institutional unit that is in turn owned by non-resident unit(s) holding the legal title.
Offshore financial centres: Jurisdictions in which the majority of the financial transactions are conducted by resident financial corporations on behalf of clients who reside outside the offshore financial centre.
Operating surplus: The income earned by resident corporations from the use of their capital in the production of goods and services during an accounting period.
Other accounts receivable/payable: Trade credit and advances and miscellaneous other items due to be paid or received.
Other changes in the volume of financial assets and liabilities: Changes in the value of assets or liabilities that are neither due to transactions nor due to holding gains and losses (revaluations). They include, amongst others, economic appearance and disappearance of non-produced assets, catastrophic losses, cancellations and write-offs of debt, uncompensated seizures, reclassifications, and the changes in financial assets arising from units changing their economy of residence. In the external accounts, the other changes in the volume of assets and liabilities are restricted to those relating to financial assets and liabilities.
Outward direct investment: All direct investment assets less liabilities between resident direct investors and their direct investment enterprises. It also covers all direct investment assets less liabilities between resident and non-resident fellow enterprises if the ultimate controlling parent is resident. Also referred to as direct investment abroad.
Own funds: The difference between total assets and total liabilities excluding shares and other equity.
Own funds at book value: Valuing the unlisted equity in an enterprise at the value appearing in its books following international accounting standards.
Parent: Entity that controls or influences an enterprise.
Partnership: A formal arrangement by two or more parties to operate a business and to share its profits. Household unincorporated market enterprises also include unincorporated partnerships that are engaged in producing goods or services for sale or barter on the market. The partners may belong to different households. When the liability of the partners for the debts of the businesses is unlimited, the partnerships must be treated as unincorporated enterprises and remain within the household sector since all the assets of the household, including the dwelling itself, are at risk if the enterprise goes bankrupt. However, unincorporated partnerships with many partners, such as some large legal, accounting or architectural firms, are likely to behave like corporations and should be treated as quasi-corporations assuming a complete sets of accounts are available for the partnerships. Partnerships whose partners enjoy limited liability are effectively separate legal entities and, as already noted, are treated as corporations.
Pass-through funds: Funds passing through a direct investment enterprise resident in an economy to an affiliate in another economy, so that the funds do not stay in the economy of the first enterprise.
Positions: Levels of financial/non-financial assets or liabilities at a point in time. In the case of financial assets/liabilities, usually the term "positions" is used while for levels of non-financial assets, the term "stocks" is often applied.
Present value: Value of an asset determined by estimating the stream of economic benefits expected to be earned in the future and then discounting the future economic benefits back to the present accounting period.
Property income: Income receivable by the owner of a financial asset or the owner of a non-produced natural resource or another non-produced non-financial asset in return for providing funds to, or putting the non-financial assets at the disposal of, another institutional unit.
Proportional ownership method: Method to allocate the inward FDI position to the ultimate investing economy (UIE). This method defines the UIE as the economy of residence of the ultimate controlling parent of the immediate direct investor(s) into the direct investment enterprise.
Quasi-corporation: Unincorporated enterprises that operate as if they were a unit separate from their owner(s). They are treated as if they are a corporation. Examples are branches, land ownership, partnerships (both of limited and unlimited liability), trusts, and resident portions of multi-territory enterprises.
Recent transaction price: Valuing the unlisted equity in an enterprise at a recent price at which the equity exchanged hands between an independent buyer and seller (i.e., at arm’s length).
Reclassifications: Changes in assets and liabilities resulting from changes in sector classification and structure (among which changes in assets and liabilities arising from units changing their economy of residence), and those resulting from changes in the classification of assets and liabilities. Also called changes in classification.
Reinvested earnings on foreign direct investment: Foreign direct investor's proportion of distributable income of a direct investment enterprise, less amounts declared for dividend distribution to direct investors, or less withdrawals from income of quasi-corporations by the direct investors. Reinvested earnings are treated as being distributed and subsequently reinvested. Reinvested earnings are included in direct investment income because the earnings of the direct investment enterprise are deemed to be the income of the direct investor (proportionate to the direct investor’s holding of equity in the direct investment enterprise), whether they are reinvested in the enterprise or remitted to the direct investor. Because reinvested earnings are not actually distributed to the direct investor but rather increase the direct investor’s investment in its affiliate, an entry that is equal to that made in the direct investment income account but in the opposite direction is entered in the direct investment financial transactions account, referred to as “reinvestment of earnings”.
Reinvestment of earnings: The entry in the financial account corresponding to reinvested earnings in the earned income account.
Residence: The economic territory with which an institutional unit has the strongest connection, i.e., its centre of predominant economic interest. While some units may have connections with more than one territory, for statistical consistency, there is a need to attribute a single economic territory based on objective and comprehensive criteria.
Rest of the world: All non-resident institutional units that enter into transactions with resident units or that have other economic links with resident units.
Retained earnings of a corporation or quasi-corporation: Distributable income less the dividends payable or less the withdrawals from income of quasi-corporations, respectively.
Revaluations: Changes in the monetary value of an asset or liability due to changes in the level of prices. Also called nominal holding gains and losses.
Reverse direct investment: Direct investment resulting from a direct investment enterprise lending funds to or acquiring equity in its immediate or indirect direct investor, provided it does not own equity comprising 10% or more of the voting power in that direct investor. Reverse direct investment is recorded as follows:
for the economy in which the direct investment enterprise is resident: claims on direct investor
for the economy in which the direct investor is resident: liabilities to affiliated enterprises.
Round-tripping: Channelling abroad by resident direct investors of local funds and the subsequent return of these funds to the local economy in the form of direct investment.
Shell company: Entity that is formally registered, incorporated, or otherwise legally organised in an economy but which does not conduct any operations in that economy other than in a pass-through capacity. They tend to be conduits or holding companies and are generally included in the description of special purpose entities.
Significant influence: Power to participate in the financial and operating policy decisions of a unit but not control those policies. Significant influence may be gained by an ownership interest, statute or agreement. In the case of foreign direct investment, a direct investor is considered to have a significant degree of influence if it owns between 10% and 50% of the voting power in a direct investment enterprise.
Special purpose entities (SPEs): A formally registered and/or incorporated legal entity recognised as an institutional unit and resident in an economy, with no or little employment up to a maximum of five employees, no or little physical presence, and no or little physical production in the host economy. SPEs are directly or indirectly controlled by non-residents. SPEs are established to obtain specific advantages provided by the host jurisdiction with an objective to (i) grant its owner(s) access to capital markets or sophisticated financial services; and/or (ii) isolate owner(s) from financial risks; and/or (iii) reduce regulatory and tax burden; and/or (iv) safeguard confidentiality of their transactions and owner(s). SPEs transact almost entirely with non-residents and a large part of their financial balance sheet typically consists of cross-border claims and liabilities. Examples are financing subsidiaries, conduits, holding companies, shell companies, shelf companies, brass-plate companies, merchanting companies, royalties and license fee companies, and operational leasing companies.
Standard data reporting: Series that have well-developed methodologies and interpretations. They are the foundation of the FDI framework and greatly enhance the analytical usefulness of FDI statistics. Also referred to as “core data”.
Subsidiary: Direct investment enterprise over which the direct investor is able to exercise control. It could also refer to domestic relationships. Subsidiaries include enterprises:
in which an investor owns more than 50% of its voting power, i.e., it is controlled by the investor
where an investor and its subsidiaries combined own more than 50% of the voting power of another enterprise, this enterprise is also regarded as a subsidiary of the investor for FDI purposes.
Superdividends: Large and irregular payments made by corporations to their shareholders or owners that are funded from accumulated reserves or sales of assets other than cash. If the distributable income is positive, the difference between the payment and the distributable income of the relevant accounting period is recorded as a superdividend under withdrawal of equity. The remainder of the payment (equal to the distributable income) is recorded as a dividend. If the distributable income is negative, the entire dividend payout is recorded as a superdividend under withdrawal of equity. The concept of superdividends does not apply to foreign direct investment where distributions from accumulated reserves are also treated as dividends. However, in the case of foreign direct investment, any additional distributions, e.g., from sales of assets, are recorded as withdrawal of equity.
Supplementary data reporting: Series outside of the standard presentation but compiled depending on circumstances in the particular economy, taking into account the interests of policymakers and analysts as well as resource costs. In some cases, supplementary series also have less well-developed methodologies.
Total economy: The entire set of resident institutional units.
Trade credit and advances: Credit extended directly by the suppliers of goods and services to their customers; and advances for work that is in progress (or is yet to be undertaken) and prepayment by customers for goods and services not yet provided.
Transactions: Economic flows that are an interaction between institutional units by mutual agreement or through the operation of the law, or actions within an institutional unit that are analytically useful to treat like transactions because the unit is operating in two different capacities. Direct investment transactions are financial flows and income flows between direct investors, direct investment enterprises, and/or other fellow enterprises.
Transactor principle: Principle whereby cross-border transactions are allocated to the economy of residence of the non-resident party to the transaction (the transactor). This principle differs from the debtor/creditor principle that is recommended by the Benchmark Definition as the basis for geographical allocation.
Transfer pricing: Valuation of transactions between affiliated enterprises.
Ultimate controlling parent (UCP): Entity that ultimately controls an enterprise, identified by proceeding up the ownership chain from the enterprise through the controlling links (ownership of more than 50% of the voting power) until an individual, household, or company that is not controlled by another company is reached. If there is no company, individual, or household that controls the resident company, then the resident company may be considered to be its own ultimate controlling parent.
Ultimate host economy (UHE): The economy of the final destination for direct investment. There are three operational definitions of the UHE discussed in the Benchmark Definition: (i) the economy of the first operating unit in the ownership chain; (ii) the economy of the last unit in the ownership chain; and (iii) the value the direct investor would receive if that subsidiary were acquired by another enterprise; that is, measuring the ultimate investor’s position in the DIE in the specific economy where it is located.
Ultimate investing economy (UIE): The economy in which the ultimate controlling parent is resident. It is the location of the ultimate source of control of the inward FDI position for a reporting economy. The Benchmark Definition recommends two methods for allocating the inward FDI position to the UIE: the proportional ownership method and the winner takes all method.
Uncompensated seizures: Governments or other institutional units taking possession of assets of other institutional units without compensation, for reasons other than payment of taxes, fines, etc.
Unlisted shares: Equity securities that are not listed on a stock exchange (also known as unquoted shares). By their nature, a market valuation is not regularly available for unlisted equity and, thus, an approximation to the market value is required. Three methods for approximating market value are preferred:
recent transaction price
own funds at book value
market capitalisation method.
Voting power: The exclusive ability to vote, through the ownership of shares of capital stock, partnership interests, or otherwise, in the election of members to the board of directors or other similar governing body of an enterprise. Generally, ordinary shares provide voting power. While voting power is generally obtained through the purchase of equity, it is possible to have voting power that is not in the same proportion as the equity ownership (for example, share classes with different voting rights or 'golden shares' have greater voting power than other shares).
Winner takes all method (WTA): Method to allocate the inward FDI position to the ultimate investing economy (UIE). This method defines the UIE as the economy of residence of the ultimate controlling parent of the direct investment enterprise. There is only one UIE for a direct investment enterprise under the WTA method.
Withdrawals from income of quasi-corporations: Part of distributable income that the owner withdraws from the quasi-corporation.
Write-off: Unilateral cancellation of debt by the creditor on recognition that a financial claim can no longer be collected due to bankruptcy or other factors.