The International Investment Position

The international investment position forms together with the balance of payment statistics a total set of international accounts for an economy. The international investment position is the balance sheets covering the stock of external financial assets and liabilities. The financial items witch comprises a countries investment position consist of claims on non-residents, liabilities to non-residents, monetary gold and SDRs.

The changes in the balance sheets (IIP) during a period reflects, in addition to financial transactions, price or exchange rate changes, and other adjustments.

Since stock levels can be utilized in the determination of investment receipts and payments in the balance of payments accounts, it is important that the classifications in the current account, the financial account and the IIP statement are consistent. Consistent classification throughout the system is also important for the possibility to conduct meaningful analyses.

The IIP statement includes, in addition to the balance sheets showing the position, one account showing the transactions in financial items between the beginning and the end of the period, one account showing the changes in the values of the assets and liabilities due to price changes, one account showing the changes due to exchange rate changes, and one last account showing the changes due to other adjustments. The IIP is a closed system.

Changes in position reflecting transactions, this account are identical to the financial account in the BOP-statement. What is there recorded as transactions are also in the IIP defined as transactions. A transactions is said to be a change in value because of an mutual agreement between two parties, transactors.

Since the IIP statement records all financial items -- assets and liabilities -- at current market prices, rather than historic cost, holding gains and holding losses need to be taken into account.

Changes in position reflecting price changes, this account records valuation changes during any specific period due to changes in the price of an asset (e.g., price on equity shares), while the account Changes in position reflecting exchange rate changes records the part of the valuation changes witch is due to changes in the exchange rate in which financial assets are nominated. The last account, Changes in position reflecting other adjustments, is recording cancellation of debt, reclassifications, allocation/cancellation of SDRs and monetary gold, expropriations, uncompensated seizures etc.