Page 159 - Invited Paper Session (IPS) - Volume 2

IPS195 Gabriel Quirós-Romero et al.
treatment is consistent with the actual cross-border cash flows resulting from
economic transactions; (ii) rerouting such transactions would require the
exchange of individual data between statistical offices, which is not possible
given existing legal constraints.
Another challenge is determining the economic ownership of intellectual
property products (IPPs), e.g. research and development, because of their
intangible nature their ownership, location and use are not easily observed.
Key amongst this is trying to determine economic ownership of these
intangible assets amongst an MNE group. The parent may assign legal
ownership of IPPs to SPEs which otherwise do not contribute to the MNE´s
production activities. Recent work of the IMF’s Task Force on SPEs put forward
a proposal to collect supplementary information on SPEs for a reduced
number of BOP and IIP components beyond direct investment activities. As
transactions in goods would be relevant for merchanting SPEs, a separate line
for net merchanting by SPEs is required. Regarding services, four distinct
components of services have been included in the reporting list where SPEs
can be of relevance: transport, financial services, charges for the use of
intellectual property, and other business services.
The principles of economic ownership of IPPs are difficult to apply inside
MNEs because the use of the IPP by one part of an enterprise group does not
prevent the simultaneous use by another part and legal ownership of IPPs can
be placed anywhere amongst the group. Currently, the guidance states to
record a change in economic ownership when a financial transaction between
two institutional units occurs, which corresponds to a change in legal
4
ownership. Various options for deviating from this suggested approach have
been discussed but further research is needed as to what can be done in
practice. Furthermore, the recording of what entity is the economic owner of
the IPP also has implications for how and where the related charges for the
use of the intellectual property are recorded. Since IPPs are often considered
corporate property, payments for its use may not always be observed
separately and may instead be shown as distributed or retained earnings from
foreign direct investment.
In the context of increasing globalization, external sector surveillance has
become central to the Fund’s mandate. Monitoring and assessing global
imbalances (large current account and net international investment position
imbalances) and disentangling any measurement distortions are of the highest
importance. IMF research suggests that statistical measures of current
accounts may not always give an accurate picture of true external imbalances
and one such measurement distortion is the treatment of retained earnings
on portfolio equity. Currently, retained earnings on portfolio equity are not

4 http://www.iariw.org/copenhagen/konijn.pdf
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