## BPM7 Chapter 7. Balance Sheet: International Investment Position: Annotated Outline

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**Canonical URL:** [BPM7 Chapter 7. Balance Sheet: International Investment Position: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-7.pdf)

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### I. Introduction
- The chapter will cover international investment position (IIP) and its main components, maintaining the overall structure from BPM6 with separate sections on:
  - concepts and coverage (Section I),
  - direct investment (Section II),
  - portfolio investment (Section III),
  - financial derivatives (other than reserves) and employee stock options (Section IV),
  - other investment (Section V),
  - reserves (Section VI),
  - off-balance-sheet liabilities (Section VII).
- Further changes may be made to improve consistency of language with other macroeconomic statistics manuals (e.g., 2025 SNA).
- Investment in the form of crypto assets:
  - reference will be provided to Chapter 6 (functional categories);
  - Chapter 4 (residency of crypto assets without corresponding liability if they were to be treated as financial);
  - Chapter 9 (recording of other changes in the volume if crypto assets without corresponding liability were to be treated as foreign assets and included in the IIP).
  - If GN F.18 yields a different outcome (i.e., if crypto assets are treated as financial assets but not as external assets), agreed recording could be included in the relevant chapter at the drafting stage and reference will be included here.

### II. Concepts and Coverage
- Updates based on GN B.4 will be introduced.
- After defining IIP (paragraphs 7.1 and 7.2), BPM7 will emphasize the increased importance of an integrated presentation of IIP that explains changes in IIP between two points in time with:
  - transactions from the balance of payments’ financial account,
  - revaluations,
  - other changes in volume.
- Integrated IIP presentation will be part of the standard components of BPM7, with the same line items as the existing standard components in Appendix 9B, BPM6.
- Emphasis on introducing direct investment presentation by sectors and instruments (GN D.7); relevant references from Chapter 6 will be provided.
- Separate reporting of data on debt cancellation and write-offs as well as reclassifications under “other changes in volume” is encouraged (to be part of supplementary items).
- Granular data from the integrated IIP presentation will help analyze the importance of other changes (revaluations and other changes in volume) for net IIP dynamics; references to Chapters 2 and 19 will be provided.
- IIP presentation structure in Table 7.1 will be updated based on the integrated IIP presentation structure recommended in Annex II, GN B.4.

### III. Direct Investment
- Section structure maintained from BPM6 with key changes.

A. Valuation of Unlisted and Other Equity — Preferred Methods
- After presenting the six methods from BPM6 paragraph 7.16, and following GN D.2, the three preferred estimation methods to provide estimates of market value are:
  - Own Funds at Book Value (OFBV),
  - Recent Transaction Prices,
  - Market Capitalization.
- It will be explained that the estimation methods aim to capture the difference between assets and liabilities of unlisted corporations to be measured at market prices—in line with the core principles of macroeconomic statistics.
- Footnote 1 (BPM6, paragraph 7.16) will be removed.
- A decision tree to aid in implementing one of the three preferred methods (GN D.2, Annex VII) will be included; the decision tree should serve as a guiding principle for countries transitioning to one of the three preferred methods.
- Treatment of negative equity will be elaborated based on the outcome of a Clarification Note to be prepared by the IMF’s Statistics Department in consultation with relevant stakeholders.
- Consistency with the discussion in 2025 SNA Chapter 14 “Balance Sheet” will be maintained.

B. Entities That Borrow on Behalf of Their Affiliates
- No significant changes foreseen except updates to chapter references on pass-through funds, SPEs, entities owned by government resident in another economy and used for fiscal purposes, etc.

C. Quasi-Corporations
- Paragraph 7.25 (last sentence) will be updated to clarify that equity in quasi-corporations may be valued using one of the three preferred methods discussed in Section III-A.

### IV. Portfolio Investment
- Structure maintained with updates to chapter references.

A. Equity with dividends declared payable but not yet paid
- No significant changes.

B. Debt instrument with accrued interest
- No significant changes.

C. Short positions
- Discussion updated based on MFSMCG paragraphs 4.73–78 and recommendation of Issue 2 in GN F.3 (Annex II).

D. Unlisted debt and equity securities
- Positions in unlisted portfolio investment equity securities without an observable market price may be valued using the methods and approach presented in Section III-A.

E. Debt securities at nominal values
- Following GN F.8, compilation of positions of debt securities at nominal value is recommended as a supplement to existing market valuation.
- Reference will be made to the table on reconciliation between nominal and market valuation of debt securities liabilities (based on GN F.8 (Annex I) included in the updated “Additional Analytical Position Data” (part of Annex 13)).
- Debt securities used in direct investment inter-company lending will be included as a supplementary item to this table.

F. Zero-coupon and deep-discount bonds
- No significant changes.

### V. Financial Derivatives (Other Than Reserves) and Employee Stock Options
- Section maintained as in BPM6 with no significant changes.

### VI. Other Investment
- Structure maintained with updates to chapter references and the following sub-sections.

A. Valuation of Nonnegotiable Instruments
- The current nominal valuation principle for loans will be maintained.
- Emphasis on strengthening the existing framework allowing for value reset even beyond cases of bankruptcy and liquidation, when there is public evidence of loan deterioration (GN F.9).
- Concessional loans: positions to be valued at nominal value as any other loan based on the contractual interest rate (GN F.15); references to relevant chapters to be provided.
- Other investment/equity in international organizations and other equity positions (GN B.12) may be valued using the methods and approach presented in Section III-A.

B. Financial Leases
- No significant changes.

C. Recording of Positions Associated with Securities Repurchase Agreements and Other Reverse Transactions
- Following GN F.1 (also F.3 and F.6), a supplementary item under loans “of which: Repurchase agreements, securities lending with cash collateral, and margin lending” will be introduced.
- Importance of separate identification of repo-related transactions and positions will be explained.

D. Overnight Deposits
- No significant changes.

E. Insurance Technical Reserves, Pension and Annuity Entitlements, and Standardized Guarantees Reserves
- No significant changes except noting that details on Takaful and Re-takaful arrangements are provided in Chapter 17 “Islamic Finance and Insurance”.
- Chapter references will be updated and consistency with 2025 SNA Chapter 24 “Insurance and Pensions” will be ensured.

### VII. Reserves
- Section maintained as in BPM6 with updated chapter references.

### VIII. Off-Balance-Sheet-Liabilities
- No significant changes expected; section will remain brief as in BPM6 with updated chapter references.

### Schematic Overview and Tables
- Table 7.1: Integrated International Investment Position Statement — IIP presentation structure will be updated per Annex II, GN B.4.
- Table 7.2: Overview of the International Investment Position — Definition of Economic Assets; Classification.
- Figure 7.1: Decision Tree for Implementing the Preferred Methods (for valuation of unlisted and other equity).
- Annex 7.1 from BPM6 is not included in this chapter; it will be discussed in Annex 9 “Positions and Transactions with IMF”.
- Usage of the term “statement” will be examined further at the drafting stage to ensure uniformity in the updated BPM.

### References and Stakeholder Consultation
- References: GNs B.4, D.2, D.7, F.1, F.3, F.6, F.8, F.9, F.15, and F.18; Clarification Note on Negative Equity (forthcoming).
- Key stakeholders consulted:
  - System of National Accounts and Balance of Payments Manual editors,
  - IMF Statistics Department Financial Institutions Division and Government Finance Division.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-7.pdf_