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A guide to BEA statistics on foreign direct investment in the United States.

A Guide to BEA Statistics on Foreign Direct Investment in the United States

THE recent surge in foreign direct investment in the United States has caused a great deal of public debate on the magnitude and significance of such investment. Attention is focused on questions such as now much is invested, who is investing from abroad, what industries are most affected, what States receive the most investment, and how are these investments financed. This guide is designed to help those interested in foreign direct investment in the United States understand the data that are collected and published by the Bureau of Economic Analysis (BEA). Its purpose is to explain the types of information collected and clarify the differences in the data sets.

Direct investment implies that a person in one country has a lasting interest in and a degree of influence over the management of a business enterprise in another country. The criteria used to distinguish direct investment from other types of investment are rather arbitrary. In most countries, some percentage of ownership of a foreign company is used. The criterion used in the United States is set forth in the International Investment and Trade in Services Survey Act, which authorizes the collection of the direct investment data by BEA. Under the act, ownership or control of 10 percent or more of an enterprise's voting securities is considered evidence of a lasting interest in or a degree of influence over management sufficient to constitute direct investment. Thus, foreign direct investment in the United States is defined as the ownership or control, directly or indirectly, by one foreign person of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or the equivalent interest in an unincorporated U.S. business enterprise. Any foreign investment that is not direct investment by this definition is considered portfolio investment. Data on portfolio investment are collected by the Treasury Department and are included, together with BEA's data on direct investment, in the U.S. international transactions accounts and in the U.S. international investment position of the United States, both of which appear in the SURVEY OF CURRENT BUSINESS.

BEA's data provide comprehensive and reliable information needed to monitor, assess the impact of, and guide U.S. policy on foreign direct investment in the United States. They give a detailed picture of the levels, growth, origin, and State and industrial distribution of foreign direct investment and of the financial and operating characteristics of the U.S. affiliates. The data are collected under the International Investment and Trade in Services Survey Act by means of mandatory surveys of the U.S. affiliates of foreign companies; they are published in regular articles in the SURVEY and in supplementary publications.(1)

General Description of Data

BEA collects three broad sets of data: (1) Balance of payments and the direct investment position data, (2) financial and operating data of U.S. affiliates, and (3) establishment and acquisition data. Each of these data sets focuses on a distinct aspect of foreign direct investment in the United States. The balance of payments and direct investment position data track the transactions and positions of both new and existing U.S. affiliates with their foreign parents; the financial and operating data provide a picture of the overall activities of the U.S. affiliates; and the acquisition and establishment data track new direct investments, regardless of whether the invested funds were raised here or abroad.

Balance of payments and direct investment position data

This set of data covers the U.S. affiliate's transactions and positions with its foreign parent or other members of its foreign parent group. (See box on page 30.) The major items included in the U.S. balance of payments are direct investment capital flows, direct investment income, royalties and license fees, and other services transactions with affiliated foreigners. The foreign direct investment position in the United States is a component of the U.S. international investment position. Balance of payments data are collected in two BEA quarterly surveys and are published in quarterly articles on U.S. international transactions in the March, June, September, and December issues of the SURVEY of CURRENT BUSINESS. The position data are published in the U.S. international investment position article in the June SURVEY. More detailed tables on capital and income flows and on the position appear in the August SURVEY.

Direct investment capital flows consist of equity and intercompany debt flows between U.S. affiliates and their foreign parent groups and the foreign parents' share of the reinvested earnings of their U.S. affiliates. They represent the financing supplied to an affiliate by its foreign parent group. As discussed in the box, capital flows can take place between the U.S. affiliate and the foreign parent, the ultimate beneficial owner (UBO), or other members of the foreign parent group.

The direct investment position equals the yearend book value of the foreign parent groups' equity (including retained earnings) in, and net outstanding loans to, their U.S. affiliates. In other words, it is the cumulative value of net capital inflows from foreign direct investors. The position at the end of the current year is equal to the position at the end of the previous year plus net capital inflows and valuation adjustments in the current year.(2)

For example, the foreign direct investment position in the United States was $271.8 billion at yearend 1987. In 1988, net capital inflows were $58.4 billion and net valuation adjustments were a negative $1.4 billion. Adding the latter two figures to the 1987 position gives the yearend 1988 position of $328.9 billion (table 1).

Table : Table 1. Foreign Direct Investment in the United States: Position, Capital, Income, and Other Flows, 1987-88 (Million of dollars)
 1987 1988
Position 271,788 328,800
Capital inflow (outflow) 46,894 58,435
 Equity capital 30,621 40,362
 Reinvested earnings 1,481 6,560
 Intercompany debt 14,792 11,513
Valuation adjustments 4,480 -1,373
Income 9,500 16,748
 Earnings 5,874 11,830
 Interest 3,626 4,918
Royalties and license fees 843 968
Other service charges -616 -694


The direct investment position estimates are carried at book value and are not adjusted to current value. Thus, they largely reflect prices at the time of investment rather than prices of the current period. For a brief discussion of book value, see the section on characteristics of the data.

Direct investment income consists of (1) the foreign parent's shares of the U.S. affiliates' earnings (net of U.S. withholding taxes on distributed earnings) and (2) interest on intercompany debt of the U.S. affiliates with their foreign parent groups. Earnings is defined as the foreign parent's share in the net income of the U.S. affiliate, after provision for U.S. income taxes. Interest is defined as interest paid by the U.S. affiliate to the foreign parent group, net of interest received by the U.S. affiliate from the foreign parent group and net of U.S. and foreign withholding taxes.

Royalties and license fees are payments by U.S. affiliates to, less receipts by U.S. affiliates from, their foreign parents and other members of the foreign parent groups of fees for the use or purchase of intangible property or rights, such as patents, trademarks, copyrights, franchises, manufacturing rights, and other intangible assets or proprietary rights. Payments and receipts are net of U.S. and foreign withholding taxes.

Other services transactions consist of payments by U.S. affiliates to, less receipts by U.S. affiliates from, their foreign parents and other members of the foreign parent groups of service charges, charges for the use of tangible property, and film and television tape rentals. Service charges consist of fees for services - such as management, professional, or technical services - rendered between U.S. affiliates and their foreign parent groups.

Financial and operating data

The primary focus of the financial and operating data is on the overall operations of the U.S. affiliate, not just on the affiliate's transactions or positions with the foreign parent group. The data cover, among other things, U.S. affiliates' balance sheets and income statements, employment and employee compensation, merchandise trade, sources of external financing, and selected data by State (table 2). They cover only nonbank U.S. affiliates. (Selected data for bank affiliates are available from the Federal Reserve System.) The estimates are based on sample data from BEA's Annual Survey of Foreign Direct Investment in the United States or on universe data from BEA's Benchmark Survey of Foreign Direct Investment in the United States. (The benchmark survey, or census, is BEA's most comprehensive survey and is normally conducted every 5 years.) An annual article in the SURVEY OF CURRENT BUSINESS gives a brief description and analysis of the data. Separate publications provide more detailed data. Data are available annually for 1977 forward.

Table : Table 2. - Selected Data of Nonbank U.S. Affiliates,
 1986-87
 Change
 1986 1987 Amount Percent
 Thousands of employees
Employment 2,937.9 3,159.7 221.8 8
 Millions of dollars
Total assets 838,039 926,042 88,003 11


Gross property, plant, and
 equipment 320,215 346,212 25,997 8
 Manufacturing(1) n.a. 124,803 n.a. n.a.
 Commercial property(2) n.a. 90,886 n.a. n.a.
 Other n.a. 130,523 n.a. n.a.
Sales 672,004 731,392 59,388 9
 Goods n.a. 621,848 n.a. n.a.
 Services n.a. 90,764 n.a. n.a.
 Investment income n.a. 18,780 n.a. n.a.
Net income 2,458 9,859 7,401 301


U.S. merchandise exports

shipped by affiliates 49,560 47,929 -1,631 -3

U.S. merchandise imports

shipped to affiliates 125,732 140,617 14,885 12

n.a. Not available.

(1.) Consists of the gross book valu of property, plant and equipment used for manufacturing, including petroleum refining.

(2.) Consists of the gross book value of all commercial buildings and associated land owned by the affiliate that is used or aperated by the affiliate or leased or rented to others. Commercial buildings include apartment buildings, office buildings, hotels, motels, and buildings used for wholesale, retail, and services trades (such as shopping centers, recreational facilities, department stores, bank buildings, restaurants, public garages, and automobile service stations).

The information collected on the overall operations of U.S. affiliates may be used to analyze the impact of foreign direct investment on the U.S. economy. For example, the information can answer questions such as: How many people do foreign-owned companies employ? How much do affiliates spend on plant expansions? What are their assets or sales? To answer these questions, data on the activity of the affiliate as a whole are needed, regardless of the foreign ownership share or the source of financing. Therefore, the data are not adjusted for percentage of foreign ownership. For example, if a French company has a 49-percent interest in a U.S. affiliate, all of the affiliate's employment is included in the data because all of the employees are affected by the foreign parent's influence or control over the management of the enterprise. (As discussed earlier, a 10-percent-or-more ownership interest is considered evidence that a foreign parent has sufficient influence or control over the management of the enterprise to constitute direct investment.)

In some cases, however, data users may want to focus their analysis on U.S. affiliates in which the foreign parent has a majority ownership share. In response to this need, BEA is developing separate estimates of financial and operating data for majority-owned U.S. affiliates - those owned more than 50 percent by foreigners. These estimates are expected to be available by mid-1990.

Acquisition and establishment data

In the late 1970's, after an unprecedented surge in foreign direct investment, BEA developed and implemented a survey of new investments that requires a report from every U.S. business that is newly acquired or established by a foreign direct investor. Since 1979, this survey has provided BEA with the information on new investments needed to continually update its universe of foreign direct investment. The survey also provides users with more timely information on new investments than was available previously. The results of the survey are summarized in an annual SURVEY article, and supplementary tables containing additional detail are available from BEA.

The data from the survey cover (1) existing U.S. business enterprises in which foreign direct investors acquired, directly or through their U.S affiliates, at least a 10-percent ownership interest and (2) new U.S. business enterprises established by foreign direct investors. The data do not cover the acquisition of additional equity in an existing U.S. affiliate by the foreign parent, the acquisition of an existing U.S. affiliate from a different foreign investor, or plant expansions by an existing U.S. affiliate. These transacations are not considered new investments because they do not result in U.S. affiliates being added to the direct investment universe; rather, they are considered either a transfer or an expansion of an ongoing investment by foreign direct investors.

The survey provides data on investment outlays, that is, on how much foreign direct investors spend in a given year to acquire or establish new U.S. affiliates. Outlays are the total dollar cost of the equity interests acquired or established. The survey also includes data on the number and type of investments and investors and on selected operating items - total assets, sales, net income, employment, and acres of U.S. land owned - for the new U.S. affiliate.

Outlays are presented by type of investor, that is, the foreign parent or an existing U.S. affiliate of the foreign parent (table 3). In the first case, the foreign parent acquires a direct ownership interest in the U.S. affiliate; in the second case, the foreign parent acquires an indirect ownership interest through its existing U.S. affiliate. [Tabular data omitted]

The Sets of Data Compared

The acquisition and establishment data and the balance of payments data provide different measures of the annual growth in foreign direct investment in the United States.

The acquisition and establishment data cover the actual outlays to establish or acquire new U.S. affiliates, regardless of how or by whom the investment was financed. Thus, the outlays may be made by either the foreign parent or an existing U.S. affiliate, and the source of financing may be other than the foreign parent group, such as local borrowing by existing U.S. affiliates. In contrast, the balance of payments data cover only transactions between foreign parent groups and U.S. affiliates. If, for example, a U.S. affiliate of a German chemical manufacturer acquired a U.S. chemical company by borrowing funds in the United States, the borrowed funds would be included in investment outlays but not in capital inflows in the balance of payments because the acquisition did not involve funds from the foreign parent.

Another difference is that direct investment capital flows finance any of the various operations of existing as well as new U.S. affiliates, whereas investment outlays finance only acquisitions and establishments of new U.S. affiliates. For example, if a German chemical manufacturer supplied its U.S. affiliate with funds to expand a plant, the funds would be included in the balance of payments data as a capital inflow, but would not be included in the acquisition and establishment data as an investment outlay because no new affiliate was created.

Direct investment capital flows related to acquisitions or establishments occur if the foreign parent purchases the equity directly or if the foreign parent or another member of the foreign parent group supplies funds to a U.S. affiliate in order to acquire or establish another U.S. business. Even in these cases, the capital flows may not equal total outlays, because the capital flows may have financed only a portion of the total. In any event, this type of inflow cannot be separated from other capital flows between the foreign parent group and its U.S. affiliates.

The acquisition and establishment data do not cover the acquisition of an existing affiliate by one foreign person from another because no new affiliate was created. For example, if a German chemical manufacturer acquired a U.S. chemical company that was already foreign owned, and thus already a U.S. affiliate, the purchase would not be covered in the acquisition and establishment data. This transaction would be included in the balance of payments data only if the new foreign parent group provided funds to another U.S. affiliate to finance the acquisition indirectly.(3)

Finally, the two sets of data are presented differently. The balance of payments data are presented by country of foreign parent and by industry of affiliate. The acquisition and establishment data are presented by country of UBO and by industry of the U.S business enterprise acquired or established. (See subsections on country and industry classification on pp. 34-35.)

Financial and operating data compared

with balance of payments data

These two sets of data provide different measures of the size of foreign direct investment in the United States. The measures differ mainly because the financial and operating data cover the overall activities of the U.S. affiliate and are not adjusted for percentage of foreign ownership. In contrast, the balance of payments data focus exclusively on the foreign parent group's investment in the affiliate.

The balance of payments data and the financial and operating data are closely related but the terminology used for certain items in the two sets of data can be a source of misunderstanding to users. For example, data users often confuse the direct investment position - a balance-of-payments-related item - with the total assets of the affiliate - a financial and operating item. Total assets of the affiliate cover all assets of the affiliate carried in its balance sheet, regardless of how the assets are financed. The position is the portion of the affiliate's assets that is financed by the foreign parent group in the form of debt or equity.

SURVEY OF CURRENT BUSINESS

One way to see the relationship between the direct investment position and total assets of the U.S. affiliate is by examining the composition of external financing of affiliates. Table 4 presents information on the external sources of funds, including funds from the foreign parent group, used by affiliates to finance assets in 1987. Affiliate liabilities and owners' equity are broken down by transactor - that is, by the foreign parent group, unaffiliated foreign persons, or U.S. persons. The values for liabilities and owners' equity of the foreign parent group are roughly equal to the direct investment position. (4) [Tabular Data Omitted]

Two important observations can be made from this table. First, although financing from foreign parent groups is an important source of funds, financing from U.S. sources is even more important. Second, foreign parents account for more than 80 percent of all owners' equity in nonbank U.S. affiliates. Thus, although only a 10-percent ownership interest in an affiliate qualifies as direct investment, most foreign parents wholly own, or have a majority interest in, their U.S. affiliates.

Another financial and operating data item that is sometimes confused with the position is the gross book values of property, plant, and equipment of affiliates. This item is taken from affiliates' balance sheets and is a measure of their total fixed assets, regardless of how these assets are financed. The direct investment position, as stated earlier, is the cumulative value of financing provided by the foreign parent group, regardless of how the funds are used. Thus, the position reflects sources of funds, whereas the gross book value of property, plant, and equipment reflects uses of funds.

BEA data on the gross book value of property, plant, and equipment are collected by State. Thus, they provide a measure of the extent of the operations of affiliates in a given State. However, information on the amount of foreign parent financing of affiliate operations in a State, or on how much foreign direct investors spend on property, plant, and equipment in the State, is not collected by BEA.

The financial and operating data are generally presented by country of UBO and the balance of payments data are, as noted earlier, presented by country of foreign parent. The country of foreign parent is often the same as the country of UBO. Exceptions arise when, for certain foreign tax, regulatory, or other purposes, foreign direct investors find it advantageous to hold or finance their direct investments in the United States through third countries. For example, many Canadian UBO's hold their U.S. affiliates through affiliates in the Netherlands for tax reasons. In addition, a significant portion of U.S. affiliate financing, including equity capital, comes from affiliates in Caribbean offshore financial centers.

Characteristics of the Data

Data Collection

All foreign direct investments in U.S. business enterprises, including all ownership of real estate other than for personal use, are subject to mandatory reporting to BEA under the International Investment and Trade in Services Survey Act (P.L. 94 - 472, 90 Stat. 2059, 22 U.S.C. 3101-3108, as amended). The data are collected by means of a series of surveys. Table 5 describes the types of information, the data collection procedures, and the publications where the results can be found.

Cofidentiality

Information collected by BEA is protected against unauthorized public disclosure by the International Investment and Trade in Services Survey Act. The act states that the information collected cannot be published or released in such a manner that the person or company that furnished the information can be specifically identified. The act further specifies that the information collected must be used only for statistical and analytical purposes. Use of an individual company's data for tax, investigative, or regulatory purposes is prohibited.

Confidentiality is crucial for maintaning the integrity of the direct investment data collection system. Confidentiality assures companies that their competitors will not gain an unfair advantage by having access to their data and that the data are gathered for statistical, not regulatory, purposes. If confidentiality were not guaranteed, companies would be less willing to provide accurate information, and the quality of the resulting statistics would suffer.

To ensure confidentiality, data are tested before publication to determine if they should be suppressed (that is, not shown). To avoid disclosing the data of an individual company, a "(D)" is placed in the data cell. The suppression of data in a cell limits analysis by users. However, BEA can do analyses based on individual company data to do special analyses for outside researchers at cost, as long as the results do not disclose proprietary information. The act also permits other Federal agencies to have access to the individual company data if they are designated to perform analytical or statistical functions under the act.

Valuation of the direct investment position

As noted previously, the direct investment position estimates are carried at book value. Thus, they largely reflect prices at the time of investment rather than prices of the current period. As a result, the foreign direct investment position may be understated in relation to current value.

Book value is used mainly because historical cost is the accepted basis for company accounting records both in the United States and many other countries. Thus, with few exceptions, book values are the only ones readily available to companies required to report in BEA surveys. For those companies that do have current value estimates, the estimates differ from company to company. For example, estimates may represent an "exit" or sale value, which can be based on an independent appraisal of an affiliate or on offers by potential buyers; or an appraisal oriented towards tax or regulatory reporting; or some measure of specific interest to the company itself or to its shareholders. BEA is investigating the feasibility of using indirect methods to estimate the current value of the foreign direct investment position.

Country classification

The foreign parent and UBO of a U.S. affiliate are each classified by country. For affiliates with more than one foreign parent or UBO, each foreign parent and UBO is classified separately.

The financial and operating data and the acquisition and establishment data are published primarily by country of UBO because the country of the person that ultimately controls, and that therefore derives the benefits from owning or controlling, the U.S. affiliate is considered the most important in analyzing these data sets. When a given affiliate has two or more UBO's, the data are shown in the country of the UBO having the largest percentage of ownership in the U.S. affiliate.

The direct investment position and balance of payments data are classified by country of foreign parent rather than by country of UBO. Any transactions with other members of the foreign parent group are assigned to the countries of the other members. This classification is consistent with the U.S. balance of payments methodology, which requires that each transaction be assigned to the foreign country with which it occured. [Tabular Data Omitted]

Industry classification

Data can be classified by industry in three ways: Industry of U.S. affiliate, industry of sales, and industry of UBO. The most widely used classification is by industry of U.S. affiliate.

When data are classified by industry of U.S. affiliate, BEA assigns each affiliate the code of the industry that accounts for the largest percentage of the affiliate's sales. The procedure is as follows: (1) A U.S. affiliate is first classified in the major industry that accounted for the largest percentage of its sales. Major industry groups are (a) agriculture, forestry, and fishing, (b) mining, (c) petroleum, (d) construction, (e) manufacturing, (f) transportation, communication, and public utilities, (g) wholesale trade, (h) retail trade, (i) finance, insurance, and real estate, and (j) services. (2) Within the major industry group, the U.S. affiliate is classified in the two-digit subindustry in which its sales were largest. (3) Within this two-digit industry, the U.S. affiliate is classified in the three-digit subindustry in which its sales were largest.

This procedure ensures that the U.S. affiliate is not assigned to a three-digit subindustry that is outside its major industry even if its sales in that subindustry exceed its sales in the largest three-digit subindustry within its major industry.

When classified by industry of affiliate, all data for an affiliate are shown in a single industry, even if the affiliate has activities in several industries. Thus, the distribution of data by industry of affiliate may differ from the distribution that would result if each of the activities of an affiliate were separately classified by industry. For example, U.S. affiliates of many foreign automobile manufacturers are classified in wholesale trade, not in transportation equipment manufacturing, because most of their sales result from the wholesale distribution of imported cars rather than from sales of cars they manufacture in the United States.

When classified by industry of sales, data in secondary industries are shown in those industries rather than all data being shown in the affiliate's primary industry. The items that are available by industry of sales are employment and sales. Prior to 1987, these data were only available in benchmark years, but are now available annually.

Classification by industry of UBO is much less detailed than classification by industry of affiliate. Each UBO is assigned to 1 of 17 broad industry categories that is specified by the affiliate. [Tabular Data Omitted]

Comparisons of Foreign

Direct Investment Data

With All-U.S.-Business Data

This section provides examples of affiliate data and all-U.S.-business data that are reasonably comparable and that provide an indication of the foreign investment share of the U.S. economy. Table 6 shows selected U.S. affiliate and all-U.S.-business data for all industries combined, and table 7 compares total assets and sales of U.S. affiliates and all U.S. businesses in manufacturing. Table 8 lists the sources of the all-U.S.-business data. The data in tables 6 and 7 are included here only to illustrate some of the comparisons that can be made. Additional comparisons may also be possible.

As tables 6 and 7 indicate, the U.S. affiliate share of the total U.S. economy varies according to the measure used. Analyses of several measures and the variations among them can be found in other BEA publications. (5)

It should be noted that, in cases where reasonably comparable U.S. affiliate and all-U.S. data are available, not all measures are available for every industry. For example, for some items, such as assets and sales, comparable U.S. affiliate and all-U.S.-business data are available only for manufacturing. For other items, such as employment, strictly comparable data are available only at the all-industries level. (6)

For a few items, such as the foreign direct investment position, no readily available U.S. counterpart exists. Because the position is the most commonly used measure of direct investment, many users would like to relate it to a comparable figure for all U.S. businesses. However, the position, as explained earlier, is the cumulation of capital flows between U.S. affiliates and members of the foreign parent group, and it is a concept relevant only in a balance of payments context.

Regardless of the measure used, comparisons of the U.S. affiliate and all-U.S.-business data should be made with caution because of definitional and conceptual differences in the data series, such as differences in valuation, industry classification, and coverage.

Valuation. - Comparisons of U.S. affiliate assets and all-U.S.-business data on assets may be affected by the use of book rather than current value. When a company is acquired, whether by foreign or U.S. buyers, its assets are often revalued to reflect the new, generally higher value implicit in the acquisition price. Because much of the growth in foreign direct investment in recent years has involved acquisitions, the share of affiliates' assets that has been revalued is probably much higher than that for all U.S. businesses. Thus, affiliates' assets may tend to be overstated relative to assets of all U.S. businesses.

Industry classification. - Comparisons of U.S. affiliate and all-U.S.-business data at detailed industry levels are not appropriate when the affiliate data are classified by industry at the enterprise (company) level and the all-U.S.-business data are classified by industry at the establishment level. For example, when affiliate employment is classified by industry of enterprise but all-U.S.-business employment is classified by industry of establishment, comparisons of the affiliate share of U.S. employment can only be made for broad industry groups, such as petroleum, manufacturing, or wholesale trade.

In benchmark years and in future annual publications, comparisons of employment can be made using data classified by industry of sales. Affiliate employment classified by industry of sales should approximate that classified by industry of establishment (plant) because an affiliate that has an establishment in an industry usually also has sales in the industry.

Another difference in industry classification between affiliate data and all-U.S.-business data is the treatment of the petroleum and coal products industry. In the affiliate data, companies in this industry are classified in petroleum, whereas in the all-U.S.-business data, they are classified in manufacturing. However, in this instance, the affiliate data can be easily reclassified to be comparable to the all-U.S.-business data.

Coverage. - The data for U.S. affiliates can be compared with data for all U.S. businesses at fairly detailed industry levels by using all-U.S.-business data classified at the enterprise level. However, differences in coverage between the two data sets may preclude comparisons for some industries. The Census Bureau's Quarterly Financial Report for Manufacturing, Mining, and Trade Corporations (QFR) contains data on total assets and sales by U.S. manufacturing subindustry. The comparisons made with these all-U.S.-business data are limited to manufacturing because the QFR data for mining and trade cover only corporations with assets over $25 million, whereas the universe estimates for U.S. affiliates cover U.S. business enterprises with assets, sales, or net income over $1 million. Also, the exclusion of unincorporated businesses from the QFR mining and trade data means that a significant portion of the all-U.S.-business activity in these industries is missing.

(4.) The figure for equity and debt investment by the foreign parent group ($234.7 billion) in table 4 does not match the position figure ($271.8 billion), primarily because the former, unlike the latter, does not cover bank affiliates and, for nonbank affiliates, does not include retained earnings or affiliates' receivables due from the foreign parent group. Also, the external financing data are on a fiscal year basis, whereas the position data are on a calendar year basis.

(5.) For the most recent analysis, see "U.S. Affiliates of Foreign Companies: 1987 Benchmark Survey Results" in the July 1989 SURVEY OF CURRENT BUSINESS.

(6.) However, reasonable comparisons below that level can be made using all-U.S. employment data disaggregated by industry of sales. See the subsection on industry classification below and the article cited in footnote 5 for further explanation.

(1) See table 5 on page 34. The data are also available on diskette or magnetic tape, and BEA can prepare additional tabulations at cost, within the limits of available resources.

(2) Valuation adjustments primarily reflect differences between transaction values, which are used to record direct investment capital inflows, and book values on U.S. affiliates' books, which are used to record the position and hence changes in the position. For example, these adjustments include differences between the sales value and the book value of affiliates that are sold by foreign parents and differences between the purchase value and the book value of affiliates that are acquired by the foreign parents.

(3.) This transation would not be included in the balance of payments data if the foreign parent purchased capital stock in the U.S. affiliate from another foreign person, because that would be a foreign-to-foreign transaction. However, if the foreigners are in different countries, offsetting valuation adjustments would be made by BEA to the direct investment position to reduce the position of the seller's country and to increase the position of the purchaser's country.
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Title Annotation:Bureau of Economic Analysis
Author:Quijano, Alicia M.
Publication:Survey of Current Business
Date:Feb 1, 1990
Words:5745
Previous Article:State and local government fiscal position in 1989.
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