## D.2 Valuation of Unlisted Equity

## Source details

**Canonical URL:** [D.2 Valuation of Unlisted Equity](https://www.imf.org/-/media/files/data/statistics/bpm6/ditt/ditt-d2-global-consultation-questionnaire.pdf)

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### Purpose and scope
- The guidance note (GN) examines the current valuation methods available in macroeconomic statistics for estimating the market value of unlisted equity.
- The GN analyzes advantages and disadvantages of the recommended methods in the current standards and raises the possibility of identifying some methods as preferred ones and/or even eliminating some of them.
- A decision tree is proposed (Annex VI) to facilitate decision-making for compilers.
- The questionnaire solicits coordinated answers between national agencies responsible for national accounts and balance of payments compilation (for example, National Statistics Office and Central Bank).

### Respondent information and coverage
- Respondents are asked to indicate country, institution/organization, name, position/title, and email.
- Respondents indicate whether their response concerns: National Accounts; Balance of Payments; or Both National Accounts and Balance of Payments.
- Question 3 asks whether the compilation approach is consistent across Balance of Payments and National Accounts (Yes/No).

### Options for reducing number of valuation methods (Conceptual recommendations)
- The GN proposes five options with respect to reducing the number of valuation methods in the BPM and SNA based on how well they approximate market value and their ease of implementation:
  - Option 1.1: Adopt the proposed use of the methods based on the decision tree presented in Annex VI and include it in the updated BPM and SNA.
  - Option 1.2: Adopt the methods recommended in the ESA 2010 and the Handbook on Financial Production Flows and Stocks in the SNA as the preferred methods for both the SNA and BPM updates, namely:
    - (a) valuation based on recent transactions (example: Recent transaction price);
    - (b) valuation based on accounting data of the corporation (examples: Net asset value, Present value/price to earnings ratios, Own funds at book value);
    - (c) valuation based on the value of a comparable corporation or of a group of comparable corporations (example: Market Capitalization Method).
  - Option 1.3: Cease recommending some of the proposed methods, those not widely used or applicable only in very specific cases as shown in the decision tree, in both the updated BPM and SNA.
  - Option 1.4: Leave some of the proposed methods as part of the methodological guidance but clearly limit their use to specific cases in the updated BPM and SNA of which (i) apportioning global value and (ii) net asset value.
  - Option 1.5: No change in the current guidance proposed in both the 2008 SNA and BPM6.
- The questionnaire elicits support levels (Strongly Disagree / Disagree / Neutral / Agree / Strongly Agree) for each option.

### Preferred methods and decision tree (Conceptual elicitation)
- Respondents are asked to select the top three preferred methods on a conceptual basis from:
  - Own Funds at Book Value (OFBV)
  - Recent transaction price
  - Market capitalization method - Price to book value (P/B)
  - Present value of expected earnings
  - Apportioning global value
  - Net asset value
- Question asks whether respondents would consider it helpful to reduce the current number of methods to value unlisted shares provided by the 2008 SNA and the BPM6 (Yes/No).
- Support for the decision tree presented in Annex VI is requested with response options: Strongly disagree / Disagree / Neutral / Agree / Strongly agree.
- Question asks whether preferred methods and the proposed decision tree should be complementarily included in the update of BPM6, BD4, and 2008 SNA with response options:
  - Yes
  - No, include preferred methods only
  - No, include decision tree only
  - No, do not include either one
  - Undecided

### Practical compilation issues (National Accounts focus)
- Conditional questions if response concerns National Accounts or Both:
  - Do you compile institutional sector accounts (ISAs) and balance sheets, including external sector accounts? (Yes/No)
    - If Yes:
      - Are ISA and balance sheet estimates on a market value basis? (Yes/No; if No specify method used)
      - Do you use any other estimation method for your ISA – historical cost? (Yes, specify instruments/assets / No)
    - If No:
      - Are you planning to compile ISAs in the future? (Yes/No)
- Importance of unlisted shares in the economy is assessed by two multipart questions:
  - a. Percentage of unlisted shares in total financial assets on the balance sheet:
    - 0 - 5%
    - 6 - 10%
    - 11- 15%
    - 16 - 20%
    - > 20%
  - b. Percentage of unlisted shares in total household financial assets on the balance sheet:
    - 0 - 5%
    - 6 – 10%
    - 11 - 15%
    - 16 - 20%
    - > 20%

### Current practice and method use
- Question 15: Which method(s) do you currently use to value unlisted and other equity (select all that apply):
  - Own Funds at Book Value
  - Recent transaction price
  - Market capitalization method - Price to book value (P/B)
  - Present value of expected earnings - Price-to-earnings ratio (P/E)
  - Apportioning global value
  - Net Asset Value
  - Other (specify)
- Conditional questions:
  - Does the method used depend on the institutional sector and data availability? (Yes/No; explain)
  - Are direct investment estimates of unlisted and other equity consistent with the approach for the domestic sectors? (Yes/No; explain)
- Reasons a method listed in Question 15 might not be implemented (select all that apply):
  - Data availability
  - Lack of resources
  - Unlisted shares are not significant
  - Other (specify)
- Data development potential within three years to use other methods to value unlisted equity (select all that apply):
  - Own Fund at Book Value
  - Recent transaction price
  - Market capitalization method - Price to book value (P/B)
  - Present value of expected earnings
  - Apportioning global value
  - Net asset value

### Intellectual property products (IPPs) and Own Funds at Book Value (OFBV)
- Question 20 (conditional): Do you compile gross fixed capital formation and stock estimates for IPPs (including own account production) such as software, research and development, databases, and mineral exploration and evaluation? (Yes/No)
- Question 21: Do you attempt to derive a market valuation of Own Funds at Book Value (OFBV) taking into consideration IPPs, including those produced on own account, that are generally not capitalized in business accounting? (Yes — brief description requested / No)

### Data, financial analysis, and accounting standards
- Question 22: Is there stock market information available by branch/activity for your economy? (Yes/No)
- Question 23: Do you produce financial ratios to analyze the financial well-being of the institutional sectors (leverage, liquidity, other financial ratios)? (Yes/No)
- Question 24: If yes to Question 23, is it important to have a market valuation for the derivation of the ratios? (Yes/No)
- Question 25: What is the most predominant accounting standard used by unlisted corporations in your economy?
  - a. International Financial Reporting System
  - b. National Generally Accepted Accounting Standard
  - c. Other standards (specify)
- Question 26: If 25 is b or c, are you able to obtain the detailed information to align the company’s assets and liabilities to the 2008 SNA definitions for instruments and balance sheets (i.e., exclude loan loss provisions, deferred taxes, etc.)? (Yes / No — explain)

### Guidance needs, capacity building, and information sharing
- Question 27 (conditional): Is additional guidance needed on compilation of unlisted equity for national accounts purposes? (select all that apply)
  - A compilation guide is needed
  - Workshops are needed
  - Current guidance is sufficient
  - Other (specify)
- Question 28: Do you consider that International Organizations assisting in implementing a system of information-sharing among statisticians would promote homogeneity in the valuation of unlisted shares worldwide? (Yes / No / Undecided)

### Treatment of negative equity and provisions
- The GN briefly discusses the treatment of negative equity and the treatment of accounting provisions, including loan loss provisions.
- Question 30: Do you agree with the proposal (Option 2.1) of preparing a separate clarification note on the treatment of negative equity? (Yes / No / Undecided)
- Question 32: Do you think that it is necessary to clarify the impact of various types of provisions on the value of unlisted equity as discussed in the note? Respondents choose agreement level separately for:
  - In the updated BPM6 and 2008 SNA (Strongly disagree / Disagree / Neutral / Agree / Strongly agree)
  - In the updated BPM6 Compilation Guide (Strongly disagree / Disagree / Neutral / Agree / Strongly agree)
  - Both, BPM/SNA and BPM Compilation Guide (Strongly disagree / Disagree / Neutral / Agree / Strongly agree)

### Open comments and explanations
- Several questions invite free-text explanations or arguments in support of responses (e.g., Questions 5, 9, 11, 16 explanations, 17 explanations, 19 other specifications, 26 explanation if No, 31 arguments on negative equity, 33 arguments on provisions, 34 other comments/suggestions).

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/ditt/ditt-d2-global-consultation-questionnaire.pdf_