## BPM7 Chapter 9. Other Changes in Financial Assets and Liabilities Account: Annotated Outline ## Source details **Canonical URL:** [BPM7 Chapter 9. Other Changes in Financial Assets and Liabilities Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-9.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-9.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-9.pdf.json) --- ### Introduction - BPM7 Chapter 9 will introduce the other changes in financial assets and liabilities account and its main components, maintaining the overall structure from BPM6 Chapter 9. - The chapter will have separate sections on: - Concepts and coverage (Section I) - Other changes in the volume of financial assets and liabilities (Section II) - Revaluations (Section III) - Further language consistency improvements may be made with other macroeconomic statistics manuals (e.g., 2025 SNA). ### Concepts and Coverage - The section will: - Introduce the other changes in financial assets and liabilities account and its main components. - Explain the need to distinguish other flows from transactions. - Illustrate how other changes in volume and revaluations, together with transactions from the financial account, can explain changes in the international investment position (IIP). - Per GN B.4, other changes in volume, exchange rate changes, and other price changes are part of the core framework (standard components). - Table 9.1 will be updated to include two supplementary “of which” categories—“reclassifications” and “debt cancellation and write-offs”—under “other changes in volume,” also mentioned in paragraph 9.5. ### Other Changes in the Volume of Financial Assets and Liabilities - The structure will be adjusted relative to BPM6 to reflect guidance notes and align with paragraph 9.7 and the SNA structure. - Two new subsections will be added: - Appearance and disappearance of financial assets and liabilities - External events - The BPM6 subsection “insurance reserves, pension entitlements, and provisions for standardized guarantee schemes” will be moved into “external events.” - The BPM6 subsection “financial assets and liabilities of persons and other entities changing residence” will become part of the subsection “reclassifications.” A. Cancellation and Write-Offs - Per GN F.9, paragraph 9.9 will be expanded to allow for value reset beyond cases of bankruptcy and liquidation when there is public evidence of loan deterioration. - Per GN WS.9: - Provisions (except in the case of standardized guarantees) are not part of the standard BPM7 framework and are therefore not treated as other flows. - Recognition of provisions is done through other changes in the volume of financial assets and liabilities in monetary and financial statistics; compilers need to know what to eliminate/ignore from positions data and other changes in volume when the source is accounting or monetary and financial statistics data. - Paragraph 9.11 on uncompensated seizures will be moved to the new subsection “external events.” B. Appearance and Disappearance of Financial Assets and Liabilities - Paragraph 9.18 on the monetization and demonetization of gold bullion will be moved to this subsection to better align with the SNA structure. - Pending the outcome of the Clarification Note Treatment of Securities Under Reverse Transactions in Reserve Assets, the chapter will clarify how monetary gold is monetized/demonetized when used for reverse transactions. - Depending on the outcome of GN F.18, crypto assets without corresponding liability may be classified as financial assets and be included in the IIP; if adopted, the monetization process would be described here. - Per GN B.9, if it is not possible to adjust historical series on cross-border assets declared under tax amnesties, those assets can be recorded in the IIP in the current period through other changes in volume. - Depending on the outcome of GN WS.7, emission permits may be recorded as financial assets with taxes on production recorded at surrender and at issuing price; if adopted, the difference between the issuing price and current market price should be recorded as other changes in the volume when the permit is surrendered. C. External Events - Paragraphs 12.46–47 in the 2008 SNA explain that catastrophic losses should be treated as other changes in volume; BPM7 will introduce a description of the treatment of catastrophic losses given relevance for cross-border ownership of land and buildings as well as financial assets and liabilities. - Paragraph 9.11 on uncompensated seizures will be moved to this subsection. - Paragraph 9.24 on changes in model assumptions and their effect on insurance reserves, pension entitlements, and provisions for standardized guarantee schemes will be moved to this subsection to better align with the SNA structure. D. Reclassifications - Paragraph 9.18 on the monetization and demonetization of gold bullion will be moved to the subsection “appearance and disappearance of financial assets and liabilities.” - Pending the outcome of the Clarification Note Treatment of Securities Under Reverse Transactions in Reserve Assets: - When securities provided as collateral are not readily available for meeting balance of payments financing needs, they should be excluded from the cash borrower’s reserve assets and reclassified to portfolio investment assets. - Financial assets and liabilities of persons and other entities changing residence will be moved to the subsection on reclassifications to better align with the SNA structure. ### Revaluations - The section will be broadly maintained as in BPM6 with specified updates. A. Debt Reorganization - No significant changes. B. Financial Derivatives and Employee Stock Options - Per GN F.4, the convention in paragraph 9.31 will change so that all revaluation effects are due to other price revaluations rather than exchange rate revaluations for types of derivatives where separating exchange rate changes from other revaluations may not be practical. - Following paragraph 6.59 of BPM6, no primary income accrues on financial derivatives; any amounts accruing under the contract are classified as revaluations. C. Implications of Different Treatments of Retained Earnings - Per GN F.2, retained earnings for non-direct investment equity will be part of BPM7, but only on a supplementary basis. D. Implications of Inconsistencies Between Transaction Prices and Values Recorded in Positions - Paragraph 9.33 focuses on implications of trading instruments recorded at nominal values in positions; the subsection will be expanded to cover differences between transaction prices and values recorded in the IIP for other instruments (e.g., unlisted equity). - The chapter will recommend treating such differences as other price changes. - Consistent with discussions on updating paragraph 238 of the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment (BD4), compilers will be encouraged to use all available information to improve estimated direct investment positions when aware they are under- or over-estimated (e.g., by implementing backward revisions according to their national revision policy). E. Implications of Treatment of Interest - No significant changes. ### Schematic Overview (chapter structure) - I Concepts and Coverage - Definition - Distinguishing other flows from transactions - Components - Table 9.1 Overview of the Other Changes in Financial Assets and Liabilities Account - II Other Changes in the Volume of Financial Assets and Liabilities - Cancellation and write-offs - Appearance and disappearance of financial assets and liabilities - External events - Reclassifications - III Revaluations - Debt reorganization - Financial derivatives and employee stock options - Implications of different treatments of retained earnings - Implications of inconsistencies between transaction prices and values recorded in positions - Implications of treatment of interest ### References and Key Stakeholders Consulted - References cited for guidance: - GNs B.4, B.9, F.2, F.4, F.9, F.18, WS.7, and WS.9. - Clarification Note Treatment of Securities Under Reverse Transactions in Reserve Assets [still under discussion] - BPM6, 2008 SNA, and BD4 - Key stakeholders consulted: - System of National Account and Balance of Payments Manual editors - IMF Statistics Department Financial Institutions Division and Government Finance Division --- _Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-9.pdf_