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32. 1997 Economic Census
(D) Suppressed to avoid disclosure of data of individual companies.
1 Prior to 1992, "depository institutions" excludes, and "finance, depository institutions" includes, savings institutions and credit unions. Beginning with 1992, savings institutions and credit unions have been reclassified from "finance, except depository institutions" to "depository institutions".
2 For investments in which more than one investor participated, each investor and each investor's outlays are classified by country of each ultimate beneficial owner.
3 Prior to 1990, this line includes data only for the Federal Republic of Germany. Beginning in 1990, this line also includes the former German Democratic Republic (GDR). This change has no effect on the data because, prior to 1991, there were no U.S. affiliates of the former GDR.
4 The UBO (ultimate beneficial owner) is that person, proceeding up a U.S. affiliate 's ownership chain, beginning with and including the foreign parent, that is not owned more than 50 percent by another person. The foreign parent is the first foreign person in the affiliate's ownership chain. Unlike the foreign parent, the UBO of an affiliate may be located in the United States.
Source: U.S. Bureau of Economic Analysis, Survey of Current Business, June 2000, and previous June issues.
* Key Terms
Direct investment. Investment in which a resident of one country obtains a lasting interest in, and a degree of influence over the management of, a business enterprise in another country. In the United States, the criterion used to distinguish direct investment from other types of investment is ownership of at least 10 percent of the voting securities of an incorporated business enterprise or the equivalent interest in an unincorporated business enterprise.
U.S. direct investment abroad (USDIA). The ownership or control, directly or indirectly, by one U.S. resident of 10 percent or more of the voting securities of an incorporated foreign business enterprise or the equivalent interest in an unincorporated foreign business enterprise.
Foreign direct investment in the United States (FDIUS). The ownership or control, directly or indirectly, by one foreign resident 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.
Foreign affiliate. A foreign business enterprise in which a single U.S. investor (that is, a U.S. parent) owns at least 10 percent of the voting securities, or the equivalent.
U.S. affiliate. A U.S. business enterprise in which a single foreign investor (that is, a foreign parent) owns at least 10 percent of the voting securities, or the equivalent. Direct investment capital flows. Fundsthat parent companiespro-vide to their affiliates net of funds that affiliates provide to their parents. For USDIA, capital flows also include the funds that U.S. direct investors pay to unaffiliated foreign parties when affiliates are acquired and the funds that U.S. investors receive from them when affiliates are sold. Similarly, FDIUS capital flows include the funds that foreign direct investors pay to unaffiliated U.S. residents when affiliates are acquired and the funds that foreign investors receive from them when affiliates are sold.
Direct investment capital flows consist of equity capital, intercompany debt,andreinvested earnings. Equity capital flows are the net of equity capital increases and decreases. Equity capital increases consist of payments made by parents to third parties for the purchase of capital stock when they acquire an existing business, as well as funds that parents provide to their affiliates that increase their ownership interest in the affiliates. Equity capital decreases are funds parents receive when they reduce their equity interest in existing affiliates. Intercompany debt flows result from changes in net outstanding loans and trade accounts between parents and their affiliates; they include loans by parents to affiliates and loans by af- filiates to parents. Reinvested earnings are the parents claim on the undistributed after-tax earnings of the affiliates.
Direct investment position. The value of direct investors equity in, and net outstanding loans to, their affiliates. The position may be viewed as the parents contributions to the total assets of their affiliates or as the financing provided in the form of equity (including reinvested earnings) or debt by parents to their affiliates. Financing obtained from other sources, such as local or foreign third-party borrowing, is excluded.
BEA provides estimates of the positions for USDIA and for FDIUS that are valued on three baseshistorical cost, current cost, and market value. At historical cost, the positions are valued according to the values carried on the books of affiliates; thus, most investments reflect price levels of earlier time periods. At current cost, the portion of the position representing parents shares of their affiliates tangible assets (property, plant, and equipment and inventories) is revalued from historical cost to replacement cost. At market value, the owners equity portion of the position is revalued to current market value using indexes of stock prices.
Valuation adjustments to the historical-cost position. Adjustments to account for the differences between changes in the position, which are measured at book value, and direct investment capital flows, which are measured at transactions value. (Unlike the positions on a current-cost and market-value basis, the historical-cost position is not adjusted to account for changes in the replacement cost of the tangible assets of affiliates or in the market value of parent companies equity in affiliates.)
Valuation adjustments to the historical-cost position consist of currency translation and other adjustments. Currency-translation adjustments are made to account for changes in the exchange rates that are used to translate affiliates foreign-currency-denominated assets and liabilities into U.S. dollars. The precise effects of currency fluctuations on these adjustments depend on the value and currency composition of affiliates assets and liabilities. Depreciation of foreign currencies against the dollar usually results in negative translation adjustments because it tends to lower the dollar value of foreign-currency-denominated net assets. Similarly, appreciation of foreign currencies usually results in positive adjustments because it tends to raise the dollar value of foreign-currency-denominated net assets.
Other adjustments are made to account for differences between the proceeds from the sale or liquidation of affiliates and their book values, for differences between the purchase prices of affiliates and their book values, for writeoffs resulting from uncompensated expropriations of affiliates, for changes in industry of affiliate or country of foreign parent, and for capital gains and losses (other than currency translation adjustments). These capital gains and losses represent the revaluation of the assets of ongoing affiliates for reasons other than exchange-rate changes, such as the partial sale of the assets for an amount different from their historical cost.
The largest component of capital flows underlying the changes in both positions was equity capital, which includes the funds used to acquire and establish new affiliates and capital contributions to existing affiliates. Equity capital accounted for almost half of the total outflows for USDIA and over four-fifths of the total inflows for FDIUS.
These tables are based on figures supplied by the United States Census Bureau, U.S. Department of Commerce and are subject to revision by the Census Bureau.
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