Home > US Direct Investment Abroad: Methodology Change, 1982

Changes in the U.S. Direct Investment Abroad Series, Beginning with 1982

The following is a brief summary of the important changes in the U.S. direct investment abroad series that have been implemented, beginning with the estimates for 1982.

Capital gains and losses

Capital gains and losses have been removed from direct investment income and the reinvested earnings component of direct investment capital flows. This change was made because capital gains and losses are not income (or returns) on investments from current operations but are part of the value of the investments (or capital). As a result of this change, direct investment income has now been converted from a financial-accounting basis to an economic-accounting basis, which means that its earnings component reflects only earnings on direct investment capital that are derived from current-period production.

Unincorporated affiliates

Beginning with the 1982 benchmark survey, data collected for unincorporated foreign affiliates were made parallel to those collected for incorporated foreign affiliates so that the same detail is now available for both types of affiliates. This change affected only the estimates of the individual components of, not the totals for, the direct investment position, income, and capital flows.

Before the 1982 benchmark survey, the direct investment position in unincorporated affiliates was reported as a single summary account. Now, U.S. parents' equity in and intercompany debt with their unincorporated foreign affiliates are each reported, and each account is combined with the corresponding data for incorporated affiliates to yield the component totals for all affiliates.

Before the 1982 benchmark survey, the reinvested earnings and the distributed earnings of unincorporated affiliates also were not reported separately. Instead, total earnings of these affiliates were treated as if they were distributed; earnings actually reinvested were treated as transfers from parents to affiliates and were included, along with other capital flows, in a single summary account in the "equity and intercompany accounts" component of total capital flows. The estimates of reinvested earnings covered only incorporated affiliates. Now, the reinvested earnings and the distributed earnings of unincorporated affiliates are each reported, and each is combined with the corresponding data for incorporated affiliates to yield totals for all affiliates. In the capital account, the single summary account for unincorporated affiliates is divided into equity capital flows, reinvested earnings, and intercompany debt flows, and each is combined with the corresponding data for incorporated affiliates to yield the component totals for all affiliates.

New benchmarking procedure

The 1983-88 estimates were derived by using a new benchmarking procedure. For the first time, benchmark survey results were used to revise estimates for years prior to a benchmark survey year. Previously, benchmark survey results were used only to extrapolate estimates forward from the benchmark year. This new procedure eliminates the discontinuity, or break-in-series, that had occurred at a benchmark year because the estimates prior to the benchmark year were extrapolated forward from the previous benchmark survey, whereas the estimates subsequent to the benchmark year were extrapolated forward from the current benchmark survey. Thus, estimates for 1983-88 that previously were only extrapolated forward from the 1982 benchmark survey have now also been interpolated backwards between the 1989 and the 1982 benchmark surveys, thereby eliminating the discontinuity at 1989.

International category

In the estimates covering 1982 forward, the "international" category consists of affiliates that have operations spanning more than one country and that are engaged in petroleum shipping, other water transportation, and oil and gas drilling. (Affiliates in these industries that have operations entirely in one country are classified in that country.) In the estimates covering 1977-81, the "international" category also included petroleum trading.

Format of the published tables

By country, the detail shown has been reorganized along geographic lines; economic or political groupings, such as "developing countries" or the European Communities, are no longer shown in the body of the tables, but in some cases they are shown as addenda.