Chapter

4. Compilation and Reporting of Direct Investment Statistics

Author(s):
Rita Mesias
Published Date:
October 2015
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It is important to differentiate between data collection (Chapters 2 and 3) and the compilation and reporting of direct investment data, as each of these steps involves special treatment.

4.1 This chapter provides guidance on the compilation of the data that are collected, on data that should be omitted from direct investment, and on the reporting of direct investment statistics for participation in the IMF’s CDIS.

Data Compilation

4.2 As recommended in Balance of Payments and International Investment Position Manual (BPM6), direct investment data should be compiled both on an Asset/Liability basis and on a Directional Principle basis (see paragraph 6.44 in BPM6).1 The Directional Principle basis should be used for reporting the CDIS survey results.

4.3 Using the example of unit B in Figure 4.1, the following describes data to be collected by compilers in Economy 2. As can be seen from Figure 4.1, B is both a direct investment enterprise (DIENT) and a direct investor (DI). Let’s assume that Enterprise B has equity investment liabilities of 100 to Enterprise A (nonresident DI); and Enterprise B has equity investment assets (reverse investment2) in Enterprise A of 5. Also, Enterprise B has debt liabilities of 25 to Enterprise A, and that Enterprise B has debt assets (reverse investment) on Enterprise A of 5. Finally, Enterprise B has equity investment assets in Enterprise D of 10 and equity investment assets in Enterprise E of 14, and there are no debt investments between B and D or E.

Figure 4.1Direct Investment of Economies 1, 2, and 3

4.4Table 4.1 presents the information collected from Enterprise B by compilers in Economy 2.

Table 4.1Economy 2: Direct Investment Position Data Collected from Enterprise B (Asset/Liability Basis)
Position of Enterprise B with:Enterprise AEnterprise DEnterprise E
Assets101014
Debt instruments500
Equity51014
Liabilities12500
Debt instruments2500
Equity10000
Source: IMF staff.
Source: IMF staff.

4.5 Under the Asset/Liability basis, the data reporting would essentially duplicate the data collection shown in the table.

4.6 Under the Directional Principle basis, investment by a DI in its DIENT and investment by a DIENT in its DI are both recorded in outward direct investment when the DI is a resident of the compiling economy, and both are recorded in inward direct investment when the DIENT is a resident of the compiling economy. That is, investment by a DIENT in its DI is essentially netted against investment by the DI in the DIENT. Table 4.2 shows how the data collected from Enterprise B would be rearranged for compilation under the Directional Principle basis.

Table 4.2Economy 2: Direct Investment Position Data Compiled for Enterprise B (Directional Principle Basis)
Position of Enterprise B with:Enterprise AEnterprise DEnterprise E
Outward1014
Equity1014
Assets1014
Liabilities00
Debt instruments
Assets
Liabilities
Inward115
Equity95
Assets*−5
Liabilities100
Debt Instruments20
Assets*−5
Liabilities25
Source: IMF staff.

In the Directional Principle basis, reverse investment (see paragraph 4.9) is recorded with a negative sign.

Source: IMF staff.

In the Directional Principle basis, reverse investment (see paragraph 4.9) is recorded with a negative sign.

Special Cases of Data Compilation

Mutual Direct Investment, Reverse Investment, and Investment in a Fellow Enterprise

4.7 When enterprises in a direct investment relationship have investment in each other, one of three situations arises: mutual direct investment, reverse investment, or investment in a fellow enterprise.

4.8Mutual direct investment: If Enterprise B has 10 percent or more of the voting power in an Enterprise A (which holds 10 percent or more of the voting power in Enterprise B), each is a DI in the other. That is, Enterprise B is both a DIENT of Enterprise A, and a DI in Enterprise A.

4.9Reverse investment: Investment by a resident DIENT in its DI (whether its immediate DI or in a DI that is higher in its ownership chain) provided that it does not own equity comprising of 10 percent or more of the voting power is called reverse investment. If DIENT Enterprise B has an investment in its DI (Enterprise A) and that investment represents less than 10 percent of the voting power in DI Enterprise A, then Enterprise B has reverse investment in Enterprise A: Enterprise B is not a DI in Enterprise A. Reverse investment also includes debt instrument claims of a DIENT on its DI.

4.10Investment in a fellow enterprise arises when an enterprise invests in another enterprise with which it has a direct investment relationship, but neither directly or indirectly holds 10 percent or more of the voting power in the other. In Balance of Payments and International Investment Position Manual (BPM6) and Benchmark Definition of Foreign Direct Investment (BD4), the concepts of inward and outward direct investment were updated for the recording of investment positions between fellow enterprises.3 In concept, both asset and liability positions between fellow enterprises are to be recorded in outward direct investment where the ultimate controlling parent (UCP) is a resident, and in inward direct investment where the UCP is a nonresident. However, in the cases where the residence of the UCP companies4 is not known, for CDIS reporting purposes, it is acceptable to record assets of a resident fellow enterprise on a nonresident fellow enterprise in outward direct investment, and to record liabilities of a resident fellow enterprise to a nonresident fellow enterprise in inward direct investment. The UCP is the DI at the top of the control chain (i.e., not controlled by any other entity).

4.11 Economies are encouraged to provide metadata that describe their treatment of positions between fellow enterprises.5

4.12Figure 4.2 is used to illustrate the direct investment relationship between a DI and DIENT, reverse investment between a DIENT and a DI, and investment between two fellow enterprises with no equity investment between them.

Figure 4.2Investments between a DI and DIENT, Reverse Investment, and Investment between Fellow Enterprises

4.13 In this example:

  • Enterprise A owns all of the equity issued by Enterprise B and by Enterprise C (50 by Enterprise B and 2 by Enterprise C).
  • Enterprise C has raised 350 on international capital markets through the issue of debt securities. Enterprise A has guaranteed these securities.
  • Of these funds raised by Enterprise C, 100 is lent to Enterprise A and 250 to Enterprise B. Enterprises A, B, and C are all in different economies.

4.14 Under the Asset/Liability basis, these positions would be recorded as shown in Table 4.3.

Table 4.3Asset/Liability Basis
For Enterprise A
Assets52Liabilities100
Of DIs in DIEsOf DIs to DIEs
equitydebt instruments
in Enterprise B50to Enterprise C100
in Enterprise C2
For Enterprise B
AssetsLiabilities300
Of DIEs to DIs
equity
to Enterprise A50
to fellow enterprises
debt instruments
to Enterprise C250
For Enterprise C
Assets350Liabilities2
Of DIEs in DIsOf DIEs to DIs
debt instrumentsequity
in Enterprise A100to Enterprise A2
Of DIEs in fellow enterprises
debt instruments
in Enterprise B250
For Enterprises A, B, and CFor Enterprises A, B, and C
Total Assets402Total Liabilities402
Source: IMF staff.
Source: IMF staff.

4.15 Under the Directional Principle basis, using the standard approach for the treatment of fellow enterprises where the UCP is a nonresident of economies 2 and 3, these positions would be recorded as shown in Table 4.4.

Table 4.4Directional Principle Basis with UCP Known*
For Enterprise A
Outward−48Inward
equity
assets of DIs in DIEs
in Enterprise B50
in Enterprise C2
debt instrument
less liabilities of DIs to DIEs
to C−100
For Enterprise B
OutwardInward300
equity
liabilities of DIEs to DIs
to Enterprise A50
debt instrument
liabilities of DIEs to fellow enterprises
to Enterprise C250
For Enterprise C
OutwardInward−348
equity
liabilities of DIEs to DIs
to Enterprise A2
debt instruments
less assets of DIEs in DIs
to Enterprise A−100
less assets of DIEs in fellow enterprises
to Enterprise C−250
For Enterprises A, B, and CFor Enterprises A, B, and C
Total Assets−48Total Liabilities−48
Source: IMF staff.*See paragraph 4.11
Source: IMF staff.*See paragraph 4.11

4.16 Under the Directional Principle basis, where the residence of the UCP is not known, the positions between fellow enterprises are recorded as outward for assets and inward for liabilities. These positions would be recorded as shown in Table 4.5.

Table 4.5Directional Principle Basis with UCP Unknown*
For Enterprise A
Outward−48Inward
equity
assets of DIs in DIEs
in Enterprise B50
in Enterprise C2
debt instrument
less liabilities of DIs to DIEs
to Enterprise C−100
For Enterprise B
OutwardInward300
equity
liabilities of DIEs to DIs
to Enterprise A50
debt instruments
liabilities of DIEs to fellow enterprises
to Enterprise C250
For Enterprise C
Outward250Inward−98
equity
liabilities of DIEs to DIs
to Enterprise A2
debt instrumentsdebt instruments
assets of DIEs in fellow enterprisesless assets of DIEs in DIs
to Enterprises C250to Enterprise A−100
For Enterprises A, B, and CFor Enterprises A, B, and C
Total Assets202Total Liabilities202
Source: IMF staff.*See paragraph 4.11
Source: IMF staff.*See paragraph 4.11

4.17 In mutual direct investment, if Enterprise B has 10 percent or more of the voting power in Enterprise A, which holds 10 percent or more of the voting power in Enterprise B, then each is a DI in the other. That is, Enterprise B is both a DIENT of Enterprise A and a DI in Enterprise A and vice versa. Under the Directional Principle basis, Enterprise A should record its investment in Enterprise B in outward (Enterprise A is a DI), and the investment provided by Enterprise B in inward (Enterprise A is a DIENT).

Reporting CDIS Data to the IMF

4.18 The CDIS results are reported to the IMF under two data templates and one metadata questionnaire. The detailed data templates and metadata questionnaires are included in Appendix I.

Data Templates

4.19 The IMF requests that economies provide inward direct investment position data as shown in Box 4.1.

4.20 Economies with significant outward direct investment position data are encouraged to report (see Box 4.2).

4.21 The data templates include a regional breakdown (see Appendix V and http://data.imf.org/CDIS). In the eventuality that some bilateral information may be confidential, compilers are asked to report regional breakdowns that would overcome the confidentiality concerns (at the economy level, compilers will use the letter “C” to identify counterpart economies for which direct investment positions are kept confidential). In some cases, data cannot be allocated to a specific economy in the region or to a specific region. In the CDIS data templates, these data are referred as “unallocated” data. Each region includes a “not specified (including confidential) by region” data category which captures the total amount of confidential data at an economy level for that region plus unallocated data within that region. The compiling economy’s global totals in the data template include a “Total not specified (including confidential)” data category that collects the sum of “not specified (including confidential) by region” or the total data reported by compilers when this cannot be presented with a regional breakdown.

Figure 4.3Special Case on Mutual Investment

Table 4.6Mutual Direct Investment: Directional Principle Basis (Economy 1)
Outward350Inward800
Equity150Equity300
DI in DIENT150DI in DIENT300
Debt Instruments200Debt Instruments500
DI in DIENT200DI in DIENT500
Source: IMF staff.
Source: IMF staff.

Box 4.1Data Reporting Template 1: Inward Total by Individual Reporting Economy

  • (1) Total Inward Direct Investment for Economy A (= item 2 plus item 3) Of which:
    • 1.a. Total Inward Direct Investment with fellow enterprises abroad (nonresident)
    • 1.b. Total equity and debt instrument liabilities (resident fellow enterprises’ liabilities to nonresident fellow enterprises)
    • 1.c. Total equity and debt instrument assets (resident fellow enterprises’ assets in nonresident fellow enterprises)
  • (2) Equity Inward Net
  • (3) Debt Instruments Inward Net (item 3.a plus item 3.b equals item 3, and item 3.c minus item 3.d equals item 3)
    • 3.a. Resident financial intermediaries (liabilities minus assets)
    • 3.b. All other residents (not financial intermediaries): (liabilities minus assets)
    • 3.c. Liabilities
    • 3.d. Assets

Box 4.2Data Reporting Template 2: Outward Total by Individual Reporting Economy

  • (1) Total Outward Direct Investment for Economy A (= item 2 plus item 3) Of which:
    • 1.a. Total Outward Direct Investment with fellow enterprises abroad (nonresident)
    • 1.b. Total equity and debt assets (resident fellow enterprises’ assets in nonresident fellow enterprises)
    • 1.c. Total equity and debt instrument liabilities (resident fellow enterprises’ liabilities to nonresident fellow enterprises)
  • (2) Equity Outward Net
  • (3) Debt Instruments Outward Net (item 3.a plus item 3.b equals item 3, and item 3.c minus item 3.d equals item 3)
    • 3.a. Resident financial intermediaries (assets minus liabilities)
    • 3.b. All other residents (not financial intermediaries): (assets minus liabilities)
    • 3.c. Assets
    • 3.d. Liabilities

4.22 Reporters should indicate the reporting currency and unit of account.

Metadata Questionnaire

4.23 In addition to the data in the templates, the IMF seeks descriptive information or metadata from participants. This information is sought on both inward and outward direct investment (if applicable) and should be periodically updated as needed. Particular disclosure should be provided when the reported data deviate from the CDIS recommended standards.

4.24 The CDIS metadata questionnaire provides useful information for data users about compilation methods and practices, and data sources and collection methods of data disseminated. This questionnaire includes, among other information, the following CDIS information:

  • Contact information of the reporting economy and information about the website used for disseminating direct investment data.
  • Data sources and collection methods. This includes information on whether data sources for direct investment are based on a sample or a census (with detail by sectors); the primary and secondary source(s) of information used in building the sample frame or census of resident DIENTs/ DIs; the reporting threshold applied, indicating if direct investment data below the threshold were estimated; the source(s) of information used to collect CDIS data; the method, if any, used in estimating data for nonresponding units, and whether CDIS data refer to calendar or fiscal year.
  • Valuation principles for equity investments (listed and unlisted) and for debt instruments (debt securities and other debt instruments). Also, whether accrued interest is included in the valuation of debt instruments.
  • Exchange rate for financial instruments denominated in a foreign currency.
  • Other specific compilation issues such as coverage of flexible corporate structures with little or no physical presence; whether the reporting unit is an enterprise or a local enterprise group (LEG); whether positions of/with fellow enterprises are recorded on a straight Asset/Liability basis or depending on the residence of the UCP; information on how economies determine UCP; the method used to determine direct investment relationships; whether direct investment in real estate is included or not; and whether debt (including permanent debt) between selected affiliated financial corporations is included in or excluded from direct investment.
  • Questions to assess consistency of CDIS data with the International Investment Position (IIP) are also included.

Reporting Dates for the CDIS

4.25 Reporting date for data: September of each year.

  • Preliminary results for reference date (end-year T), and revised data for previous year/s should be reported to the IMF not later than September of year T+1 (nine months after the reference date for the most recent year).

4.26Chapter 5 of this Guide, Undertaking a Direct Investment Survey, provides a broad framework for a timetable for undertaking an enterprise survey.

1The Directional Principle is a presentation of direct investment data organized according to the direction of the direct investment relationship. It can be contrasted with the asset and liability presentation of aggregates, which are organized according to whether the investment relates to an asset or a liability. (See more detailed information in BPM6, paragraphs 6.42-6.43.)
2See description of reverse investment in paragraph 4.9.
3As noted earlier, fellow enterprises are enterprises that have the same direct investor, and the investor must be a DI in at least one of them. Neither fellow enterprise has voting power of 10 percent or more in the other enterprise (or else they are a DI and DIENT instead of fellows). The Extended Directional Principle includes both assets and liability positions between a given pair of fellow enterprises entirely in outward direct investment when the UCP is a resident of the compiling economy, and entirely in inward direct investment when the UCP is a nonresident of the compiling economy. This parallels the (net) recording rules for asset and liability positions that apply to positions between a DI and its DIENT. (In contrast, under earlier recording rules (see OECD Benchmark Definition of Foreign Direct Investment, third edition), asset positions between fellows were recorded in outward direct investment and liability positions were recorded in inward direct investment, or gross recording instead of net recording of these positions. See also paragraph 4.52 in BD4).
4Depending on how an economy treats Local Enterprise Groups (LEGs), a given position could be recorded in either inward or in outward direct investment, and a given enterprise may be a fellow enterprise instead of a DI or a DIENT.
5At the time of writing this Guide, about 50 CDIS participating economies reported data for fellow enterprises for inward direct investment and about 30 reported data for fellow enterprises for outward direct investment.

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