Changes in the U.S. Direct Investment Abroad Series, Beginning with 1994

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 1994.

Reclassification of intercompany debt and associated interest transactions with financial intermediaries

Intercompany debt transactions between parent companies and affiliates that are not depository institutions and that are primarily engaged in financial intermediation are reclassified from the direct investment accounts to capital transactions with unaffiliated foreigners (part of the portfolio investment accounts). Similarly, interest receipts and payments associated with such intercompany transactions are reclassified from the direct investment income accounts to income transactions with unaffiliated foreigners. This treatment is similar to the treatment of nonpermanent debt investment and associated income transactions between affiliated depository institutions, and it is consistent with the guidelines in the International Monetary Fund's Balance of Payments Manual (fifth edition), which suggest that these transactions of financial intermediaries are to be excluded from the direct investment accounts. Equity capital transactions with these financial intermediaries, and the associated earnings receipts and payments, continue to be classified as direct investment.

Intercompany debt transactions and associated interest transactions between U.S. parents and the following three groups of nonbank foreign financial affiliates are reclassified: (1) Financial affiliates located in the Netherlands Antilles, (2) financial affiliates whose U.S. parents are depository institutions, and (3) financial affiliates whose U.S. parents are securities dealers.