## 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/final-annotated-outlines/bpm7-chapter-9-other-changes-in-financial-assets-and-liabilities-account-annotated-outline.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-9-other-changes-in-financial-assets-and-liabilities-account-annotated-outline.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-9-other-changes-in-financial-assets-and-liabilities-account-annotated-outline.pdf.json) --- ### Introduction - The chapter introduces the other changes in financial assets and liabilities account and its main components; the overall structure from BPM6 Chapter 9 will be maintained. - 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 wording changes may be made to improve consistency with other macroeconomic statistics manuals (e.g., 2025 SNA). - Changes from BPM6 are highlighted in yellow in the annotated outline. ### Concepts and Coverage - The section structure from BPM6 will be maintained and 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 now 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,” which will also be mentioned in paragraph 9.5. ### Other Changes in the Volume of Financial Assets and Liabilities - The section structure will be adjusted from BPM6 to 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” - BPM6 subsections will be reorganized: - “insurance reserves, pension entitlements, and provisions for standardized guarantee schemes” → moved into the new “external events” subsection; - “financial assets and liabilities of persons and other entities changing residence” → moved into the “reclassifications” subsection. A. Cancellation and Write-Offs - Per GN F.9: - the discussion of write-offs in 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. - the treatment of provisions differs in financial accounting and monetary and financial statistics where they are part of the main framework. - 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 both from positions data and other changes in the volume of financial assets and liabilities 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” to better align with the SNA structure. 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”, clarification will be provided on how monetary gold is monetized/demonetized when used for reverse transactions. - Per GN B.9: - if it is not possible to adjust historical series on cross-border assets declared under tax amnesties, these 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 of the financial asset and liability 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; a description of the treatment of catastrophic losses will be introduced in BPM7 because such losses could be relevant for cross-border ownership of land and buildings as well as financial assets and liabilities, and feed into measures of climate change risk in external sector statistics (GN B.6). - 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 new 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. - The section on 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 changes. 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 those types of derivatives where it may not be practical to separate exchange rate changes from other revaluations. - Following paragraph 6.59 of BPM6: - unlike other functional categories, 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 and non-investment fund shares will be part of BPM7 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 as described in GN D.2) and recommend treating the differences as other price changes. - Compilers will be encouraged, consistent with discussions on updating paragraph 238 of the fourth edition of the OECD Benchmark Definition of Foreign Direct Investment (BD4), to use all available information to improve the quality of 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 - 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 Guidance Notes Cited - GNs B.4, B.6, B.9, D.2, 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 - 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-9-other-changes-in-financial-assets-and-liabilities-account-annotated-outline.pdf_