## BPM7 Chapter 13. Secondary Income Account: Annotated Outline

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**Canonical URL:** [BPM7 Chapter 13. Secondary Income Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-13-secondary-income-account-annotated-outline.pdf)

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### Overview of the Secondary Income Account
- The structure and content follow Balance of Payments and International Investment Position Manual, sixth edition (BPM6) Chapter 12, maintaining the main components and links to gross national disposable income and contrasting secondary income with primary income.
- The chapter will include separate sections: overview (Section I), concepts and coverage (Section II), and types of current transfers (Section III).
- Further language adjustments may be made for consistency with other macroeconomic statistics manuals (e.g., System of National Accounts 2025).

### Concepts and Coverage
- Section II discusses coverage, timing, and valuation for secondary income, retaining BPM6 treatment with the following updates and clarifications.

A. Transactions: Exchanges and Transfers
- No significant changes from BPM6.

B. Distinction Between Current and Capital Transfers
- Per GN C.8, the list of transactions considered capital transfers will be expanded to include nonrecurrent payments in compensation for accumulated losses or extensive damages; these were not listed explicitly in BPM6 (though discussed in paragraphs 12.55–56).

C. Recording and Valuation of Transfers
- Per GN C.8, paragraphs 12.17–18 will be modified to clarify:
  - Fine/penalty transactions should not be recorded until the unit issuing the fine has an “unconditional claim to the funds.”
  - If a judgment or ruling is subject to further appeal, an unconditional claim exists “when the appeal is resolved.”
  - The corresponding entry to fines and penalties accrued but not yet paid should be recorded as other accounts receivable/payable.
- Examples and recording guidance from 2008 SNA Chapter 8 on redistribution of income accounts—such as transfers in cash, provision of goods and services by enterprises, and social transfers in kind—may be added to BPM7 for consistency/completeness.

### Types of Current Transfers
A. Personal Transfers
- No significant changes from BPM6.

B. Other Current Transfers
- Pending the outcomes of GN WS.14, the discussion of the borderline between taxes and service fees will be expanded/clarified and aligned across the manuals.
- Stemming from the outcomes of the AEG decision (7/2012), the discussion of non-life insurance-related transfers will be expanded to clarify how a major catastrophic event should be defined for purposes of determining if transfers are current or capital.
- Based on GN F.12, the treatment of net premiums and claims on hybrid insurance products will depend on the allocation of the product as either life or nonlife insurance.
- The discussion on fines and penalties (paragraph 12.54) will be expanded per C.8 (see Annex VI). It will be clarified that contingent fines and penalties in mergers and acquisitions contracts are updates to the market value of the acquired enterprise and therefore should be recorded as direct investment or portfolio investment flows, not as transfers.
- The discussion of major compensation payments (12.55–56) will be updated to clarify when compensation payments should be treated as capital transfers (C.8).
- Based on the decision in GN B.8, a new paragraph will describe the treatment of nonrefundable contributions to government (or their nominated agency) under citizen-by-investment (CBI) programs as non-tax revenue (transfers not elsewhere classified). The choice of current or capital transfer should be based on the specific nature of the program following statistical principles from the manual. The current treatment of refundable contributions to CBI programs—as investment—will be retained.
- The related discussion of stability fees and their treatment (AEG 7/2012 and 8/2013) may have implications for balance of payments that still need to be investigated.

### Schematic Overview (Structure and Components)
- I Overview of Secondary Income Account
  - Definition
  - Distinguishing Primary Income from Secondary Income
  - Components
  - Table 13.1 Overview of the Secondary Income Account
- II Concepts and Coverage
  - A. Transactions: Exchanges and Transfers
  - B. Distinction Between Current and Capital Transfers
  - C. Recording and Valuation of Transfers
- III Types of Current Transfers
  - A. Personal Transfers
  - B. Other Current Transfers
- References include GNs B.8, C.8, F.12, and WS.14*, and AEG 7/2012 and 8/2013 meeting decisions relevant to life insurance, major catastrophic events, and stability fees.
- Key stakeholders consulted include System of National Account and Balance of Payments Manual editors and IMF Statistics Department Financial Institutions Division and Government Finance Division.

*Guidance notes under consultation at the time of writing are marked by an asterisk (*).*

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-13-secondary-income-account-annotated-outline.pdf_