## BPM7 Chapter 8. Financial Account: Annotated Outline

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**Canonical URL:** [BPM7 Chapter 8. Financial Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-8.pdf)

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### I. Introduction
- The chapter will introduce the financial account and its main components, maintaining the overall structure from BPM6.
- Separate sections will cover: 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); Reserve Assets (Section VI); and Arrears (Section VII).
- Further changes may be made to improve consistency with other macroeconomic statistics manuals (e.g., 2025 SNA) and to add references to other chapters regarding treatment of financial instruments.

### II. Concepts and Coverage
- Maintained as in BPM6 with no significant changes.
- Will introduce the financial account, explain:
  - the use of net recording in the standard framework and gross recording on a supplementary basis;
  - principles related to timing and valuation.

### III. Direct Investment
- Structure slightly adjusted from BPM6: a new subsection on Dividends and Withdrawal of Equity replaces the BPM6 subsection on Superdividends (superdividends will not apply to direct investment in BPM7).
- Subsections:
  - Reinvestment of Earnings — no significant changes.
  - Dividends and Withdrawal of Equity:
    - Per GN D.17 and the Issue Note “Identifying Superdividends and Establishing the Boundary Between Dividends and Withdrawal of Equity in the Context of Direct Investment”, the concept of superdividends does not apply to direct investment enterprises.
    - Distributions of accumulated reserves from ordinary earnings should be treated as dividends.
    - Earnings from non-operating activities (sales of fixed capital assets and liquidations of branches) are treated as exceptional and recorded as withdrawals of equity.
  - Direct Investment Flows in Kind — no significant changes.
  - Mergers and Acquisitions:
    - Will be contrasted with greenfield investment and extension of capacity as described in GN D.1.
    - References to Chapter 6 on functional categories and Appendix 6 on selected direct investment issues for further detail.
  - Corporate Inversion and Other Restructuring:
    - Definition of corporate inversions updated with the amendment in GN D.4.
    - Text shortened and Appendix 6 expanded to include a taxonomy of common corporate actions involving inversions or similar restructuring.
  - Borrowing for Fiscal Purposes:
    - Subsection updated with guidance on recording imputations with a more analytically meaningful instrument breakdown as described in GN D.5.
    - Reference to Appendix 6 for further detail.

### IV. Portfolio Investment
- Structure slightly adjusted from BPM6 with a new subsection on Superdividends.
- Subsections:
  - Reinvestment of Earnings in Investment Funds:
    - Per GN F.2 and the Issue Note “Identifying Superdividends and Establishing the Boundary Between Dividends and Withdrawal of Equity in the Context of Direct Investment”, reinvestment of earnings for portfolio investment other than investment funds is not part of the standard components but is a supplementary item in BPM7.
  - Superdividends (new):
    - Any distribution in excess of operational profits, including out of accumulated reserves, should be classified as a superdividend and treated as withdrawal of equity.
  - Convertible Bonds — no significant changes.
  - Debt Defeasance — no significant changes.
  - Share and Debt Buybacks — no significant changes.
  - Bonus Shares — no significant changes.

### V. Financial Derivatives (Other Than Reserves) and Employee Stock Options
- Structure same as BPM6, with additional guidance on financial derivatives.
- Subsections:
  - Financial Derivatives:
    - Per GN F.4, paragraph 8.34 of BPM6 will be updated to clarify when recording transactions on a net basis is acceptable (i.e., where separate data on transactions in assets and liabilities are not available, and the position may change between assets and liabilities, e.g., forwards and swaps).
    - Methodological guidance will be added for recording novation and portfolio compression as financial transactions.
    - Depending on the outcome of GN F.10, margins may be classified as loans in certain circumstances; paragraph 8.39 on margins would be updated accordingly if that treatment is adopted.
  - Employee Stock Options — no significant changes.

### VI. Other Investment
- Structure maintained from BPM6, with additional references to treatment of reverse transactions.
- Subsections:
  - One-off Guarantees and Other Debt Assumption — no significant changes.
  - Insurance Technical Reserves, Pension Fund Entitlements, and Provisions for Calls Under Standardized Guarantees:
    - Following the decision at the 15th Meeting of the Advisory Expert Group on National Accounts, when nonlife insurance policies are surrendered by mutual agreement between policyholders and nonlife insurers:
      - technical reserve liabilities of nonlife insurers will be reduced by the amount of unearned premiums returned to policyholders and recorded as a transaction;
      - technical reserve assets of policyholders will be reduced by the same amount and recorded as a transaction.
  - Special Drawing Rights — no significant changes.
  - Securities Repurchase Agreements and Other Reverse Transactions — no significant changes.
    - Following GN F.3, updated references to Chapter 7 and Chapter 12 where reverse transactions are discussed in further detail.
  - Currency — no significant changes.
  - Change of Contractual Terms — no significant changes.

### VII. Reserve Assets
- Maintained as in BPM6 with one addition:
  - Transactions involving unallocated gold accounts are recorded in the financial account under reserve assets only if they occur between two monetary authorities for reserve purposes or between a monetary authority and an international financial organization.
  - Otherwise, such transactions are classified as currency and deposits.
  - Reference to Chapter 6 for treatment of securities (and gold bullion) under reverse transactions in reserve assets.

### VIII. Arrears
- Maintained as in BPM6 with no significant changes.

### Schematic Overview (Table 8.1: Overview of the Financial Account)
- I Concepts and Coverage:
  - Net Recording
  - Gross Recording on a Supplementary Basis
  - Timing and Valuation
- II Direct Investment:
  - Reinvestment of Earnings
  - Dividends and Withdrawal of Equity
  - Direct Investment Flows in Kind
  - Mergers and Acquisitions
  - Corporate Inversion and Other Restructuring
  - Borrowing for Fiscal Purposes
- III Portfolio Investment:
  - Reinvestment of Earnings in Investment Funds
  - Superdividends
  - Convertible Bonds
  - Debt Defeasance
  - Share and Debt Buybacks
  - Bonus Shares
- IV Financial Derivatives (Other Than Reserves) and Employee Stock Options:
  - Financial Derivatives
  - Employee Stock Options
- V Other Investment:
  - One-Off Guarantees and Other Debt Assumption
  - Insurance Technical Reserves, Pension Fund Entitlements, and Provisions for Calls Under Standardized Guarantees
  - Special Drawing Rights
  - Securities Repurchase Agreements and Other Reverse Transactions
  - Currency
  - Change in Contractual Terms
- VI Reserve Assets
- VII Arrears

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-8.pdf_