Asset/liability principle

Data can be reported based on one of two principles. When applying the asset/liability principle (ALP), FDI assets and liabilities are reported in gross terms. This principle is consistent with the international requirements for compiling the balance of payments and the stock statistics for the international investment position. The international investment position (i.i.p.) records the FDI stock statistics, amongst other things, on a quarterly basis; these are based mainly on the annual survey of FDI stocks. Since the results of the FDI stocks survey are compiled from balance sheets, however, data are available only with a lag of 16 months after year-end. Therefore, the i.i.p. data at the current end are estimated using transaction reports from the balance of payments and are subsequently revised using the collected stock data.

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Extended directional principle

Unlike the traditional comparison of assets and liabilities, the extended directional principle (xDP) takes into account capital links in the FDI relationship. Thus, reverse investments, where a direct investment enterprise provides funds to the direct investor, are deducted and links between fellow enterprises are also taken into account. These inter-company loans are assigned to a direction based on where group headquarters are resident. If the group’s headquarters are in Germany, all credit positions between resident and non-resident fellow enterprises are recorded as outward foreign direct investment by Germany. Conversely, for group headquarters located abroad, those positions are recorded as inward FDI in Germany.

Ultimate concepts

The xDP provides information on capital flows both from the direct investor to the direct investment enterprise and vice versa. The ultimate concepts, on the other hand, depict investment in the first operating unit. This means that, depending on the direction being considered, the data reflect the country in which the investment is made from the perspective of the ultimate controlling parent at the end of the ownership chain (ultimate investing economy). The ultimate host economy approach identifies the first operating unit in a foreign country that is not a special-purpose vehicle (e.g. a holding company or special-purpose entity).

Ultimate investing economy (UIE)

The ultimate controlling parent (UCP) is defined as the entity that holds more than 50 % of the voting rights in another enterprise across the ownership chain. In line with international recommendations, the value of the FDI is calculated based on the winner-takes-all (WTA) method. This means that all investments in an entity in the UIE are attributed to the UCP.

Ultimate host economy (UHE)

This approach is used to determine the value of the investment in the first operating unit. For example, special-purpose entities are tasked with raising capital, but do not have a productive purpose. The latter purpose is more relevant for the analysis, however. The value of FDI is therefore measured via the first operating unit. Here, too, reporting follows international standards.