## BPM7 Chapter 8. Financial Account: Annotated Outline ## Source details **Canonical URL:** [BPM7 Chapter 8. Financial Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-8-financial-account-annotated-outline.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-8-financial-account-annotated-outline.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-8-financial-account-annotated-outline.pdf.json) --- ### Introduction - BPM7 will retain the overall structure of BPM6 Chapter 8 while introducing targeted updates to improve consistency with other macroeconomic statistics manuals (e.g., 2025 SNA) and to add references to other chapters for instrument treatments. - Main components retained: 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). - Changes from BPM6 are highlighted in the outline and may be supplemented during drafting. ### Concepts and Coverage - No significant changes from BPM6. - Will introduce the financial account, explain the use of net recording in the standard framework and gross recording on a supplementary basis, and set out principles related to timing and valuation. ### Direct Investment — Structural and Conceptual Updates - Section structure slightly adjusted from BPM6. - Superdividends concept will not apply to direct investment in BPM7; replaced by explicit treatment of dividends and withdrawal of equity. Key updates and clarifications: - Reinvestment of Earnings: no significant changes. - Dividends and Withdrawal of Equity: - Replaces BPM6 subsection Superdividends (paragraph 8.23 of BPM6). - 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. - Only 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 in GN D.1. - References to Chapter 6 (functional categories) and Annex 6 (selected direct investment issues) where greenfield investment and extension of capacity will be addressed in further detail. - Corporate Inversion and Other Restructuring: - Definition of corporate inversions updated with amendment in GN D.4. - Text shortened; Annex 6 will be 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 Annex 6 for further detail. ### Portfolio Investment — New Subsection and Supplementary Items - Structure adjusted to add a new subsection on superdividends. Key points: - Reinvestment of Earnings in Investment Funds: - Per GN F.2 and the Issue Note, reinvestment of earnings for portfolio investment other than investment funds will be incorporated as a supplementary item to BPM7. - Superdividends (new): - Per the Issue Note “Identifying Superdividends and Establishing the Boundary Between Dividends and Withdrawal of Equity in the Context of Direct Investment”: - Any distribution in excess of operational profits, including out of accumulated reserves, should be classified as a superdividend and treated as withdrawal of equity. - The practical difficulties of implementing this treatment will be acknowledged. - Convertible Bonds, Debt Defeasance, Share and Debt Buybacks, Bonus Shares: no significant changes. ### Financial Derivatives (Other Than Reserves) and Employee Stock Options - Structure maintained with expanded methodological guidance on derivatives. Financial derivatives updates: - Per GN F.4: - Paragraph 8.34 of BPM6 will be updated to clarify cases in which 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, swaps)). - Guidance added for recording novation and portfolio compression as financial transactions, including the role of central counterparties. - Margins: - Depending on the outcome of GN F.10, margins may be classified as loans in certain circumstances; paragraph 8.39 on margins will be updated if that treatment is adopted. - Employee Stock Options: no significant changes. ### Other Investment — Clarifications on Reverse Transactions and Insurance Treatments - Structure maintained; additional references to reverse transactions treatment. Key clarifications: - 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. - Correspondingly, technical reserve assets of the 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, but updated references to Chapter 7 and Chapter 12 for further discussion of reverse transactions. - Currency and Change of Contractual Terms: no significant changes. ### Reserve Assets — Recording of Unallocated Gold Accounts and Reverse Transactions - Section retained with one addition on unallocated gold accounts. Clarification: - Consistent with paragraphs 9.19–20 of BPM6: - 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 included to Chapter 6 for treatment of securities (and gold bullion) under reverse transactions in reserve assets. ### Arrears - Maintained as in BPM6 with no significant changes. ### Schematic Overview (Table 8.1) - Overview of the Financial Account components and themes: - 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 ### References and Stakeholder Consultation - Guidance notes informing updates: GNs D.1, D.4, D.5, D.17, F.2, F.3, F.4, and F.10 (guidance notes under consultation at time of writing are marked by an asterisk). - Issue Note referenced: “Identifying Superdividends and Establishing the Boundary Between Dividends and Withdrawal of Equity in the Context of Direct Investment”. - Clarification Note under discussion: “Treatment of Securities Under Reverse Transactions in Reserve Assets”. - Paper prepared for agenda item 3.1 of the 15th Meeting of the Advisory Expert Group on National Accounts: “Incorporating Corrected Inconsistencies in the 2008 SNA, Clarifications and Interpretations and Other Global Statistical Initiatives into the Updated 2008 SNA”. - Key stakeholders consulted: - System of National Accounts and Balance of Payments Manual editors - IMF Statistics Department Financial Institutions Division and Government Finance Division - Balance of Payments Task Team - Global Consultation of the External Sector Statistics Community --- _Source: https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-8-financial-account-annotated-outline.pdf_