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This page provides additional information about data in the Board of Governors' statistical release on the Financial Accounts of the United States (Z.1). Most of the information is of a technical nature and represents answers to questions that may be of interest to a range of analysts and researchers. The page will be updated as such questions arise.

Documentation for the data in the Z.1 release is available on the About page on the Board's website.

Can you provide some detail on the changes in the Nonfinancial Corporate Business tables (F.102, L.102 and B.102) in the 2014 Second Quarter Z.1 publication?

When a corporate business buys another publicly or privately held corporation in its entirety, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

When a corporate business acquires a partial ownership stake in another publicly or privately held corporation, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

When a corporate business buys back its own equity, does the difference between the market price it pays and the historical cost appear as goodwill in the other miscellaneous assets flows and levels tables?

How much of the increase in other miscellaneous assets in the levels table is linked to companies buying companies either in full or in part?

When a corporate business buys all the equity of another publicly or privately held corporation, how is this registered in the "net equity issuance" series in the flows table?

How do hedge fund assets of U.S. households show up on the household balance sheet in the Financial Accounts?

How is the Securities Data Corporation (SDC) bond data used to calculate series FA103163003.Q in the Flow of Funds data set? Which categories of the SDC bond data do you focus on, and what are you using as a filter?

I have been looking at the Flow of Funds report Table F.212 - Net Issues and have some questions how the SDC Bond database is used.

 

Q: Can you provide some detail on the changes in the Nonfinancial Corporate Business tables (F.102, L.102 and B.102) in the 2014 Second Quarter Z.1 publication?

Posted: 09/19/2014

We incorporated new data on corporate bond retirements from the Mergent Fixed Income Securities Database into the publication. This new data indicated that we have previously been understating corporate bond retirements, leading us to overstate net issuance of corporate bonds. As a result of this data revision, we have revised net corporate bond issuance (line 43 of F.102) from 1995Q2 onwards.

We calculate the level of corporate bond issuance as the level outstanding during the previous quarter plus net issuance during the current quarter. As such, the revision to the net issuance series also resulted in a revision to the level of corporate bonds (line 26 of L.102).

The other miscellaneous liabilities series (line 36 of L.102) are calculated residually as total liabilities (line 22 of L.102) minus the identified liabilities. As such the revision to the level of corporate bonds lead to an offsetting revision to the level of other miscellaneous liabilities.

We have revised the method used to measure gross equity issuance to incorporate additional data from Compustat. As a result of this data, we have revised the net new equity issuance series from 2002Q1 onwards. The market value of equities outstanding (line 39 of B.102) is calculated using separate data sources, and as such, this series is unchanged.

We have also moved U.S. direct investment abroad (line 22 of B.102) and Foreign direct investment in U.S. (line 34 of B.102) to their own data lines. Previously, they had been included as part of Miscellaneous assets and liabilities, respectively.

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Q: When a corporate business buys another publicly or privately held corporation in its entirety, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

Posted: 05/07/2014

The difference between the purchase price of the target corporation and the book value of the target corporation is recorded in the balance sheet of the acquirer as "goodwill". This goodwill from the acquisition will be recorded in the other miscellaneous assets category of F.102 and L.102.

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Q: When a corporate business acquires a partial ownership stake in another publicly or privately held corporation, is this operation recorded in the "other miscellaneous assets" in the flows and levels tables?

Posted: 05/07/2014

A corporation taking a partial ownership stake in another corporation is considered an "inter-corporate holding," and as such, should be excluded from the nonfinancial corporate business sector. However, due to data limitations, we have little information on this type of transaction, and it is likely that the measure of inter-corporate holdings we exclude in the Financial Accounts understates the true value of such holdings. As other miscellaneous assets are calculated residually in F.102 and L.102, this measurement problem with inter-corporate holdings likely causes the reported other miscellaneous assets series to be higher than what it should be.

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Q: When a corporate business buys back its own equity, does the difference between the market price it pays and the historical cost appear as goodwill in the other miscellaneous assets flows and levels tables?

Posted: 05/07/2014

When a corporation buys back its own equity with cash, the entire amount of the transaction is recorded as an equity retirement. This transaction is not counted as goodwill, nor does it appear in the other miscellaneous assets series.

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Q: How much of the increase in other miscellaneous assets in the levels table is linked to companies buying companies either in full or in part?

Posted: 05/07/2014

A sizeable portion of the increase in other miscellaneous assets is linked to goodwill from acquisitions and to partial ownership stakes in other companies, although the latter should, in principle, be excluded from the nonfinancial corporate business sector.

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Q: When a corporate business buys all the equity of another publicly or privately held corporation, how is this registered in the "net equity issuance" series in the flows table?

Posted: 05/07/2014

The recording of this transaction depends on the method of payment. If a corporation buys the equity of another corporation using its own equity, the transaction has no effect on net equity issuance, as the value of the equity retired in the target corporation is offset by an equal value of issuance by the acquirer. This reflects the fact that there is no cash exchanged in the transaction. However, if the acquirer paid in cash, the value of the transaction would show as a negative item in net equity issuance offset by a decline in cash holdings.

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Q: How do hedge fund assets of U.S. households show up on the household balance sheet in the Financial Accounts?

Posted: 02/26/2014

The answer depends on whether the hedge fund is onshore (domestic) or offshore (foreign). The following answer is also predicated on the assumption that all transactions are carried out through U.S. brokers.

Onshore: If the hedge fund is domestic (located in the U.S.) then it is easiest to think of them as being consolidated on the household balance sheet (like nonprofits). That is, the household balance sheet will pick up the portfolio holdings of hedge funds in bonds, stocks and any other financial instruments held by the hedge fund, but those holdings cannot be distinguished from direct household holdings of those financial instruments.

Offshore: If the hedge fund is located offshore (like in the Cayman Islands), then the hedge fund itself is part of the rest of the world sector. That is, purchases of U.S. stocks and bonds by an offshore hedge fund would show up in our estimate of net purchases of U.S. stocks and bonds by the rest of the world (thereby reducing U.S. households' direct holdings of those assets). These data on portfolio holdings are collected for the balance of payments statistics by surveying transactions of U.S. brokers/dealers.

If a U.S. household purchases a share of an offshore hedge fund, then it should show up in the data as an issuance of equity by the rest of the world, and therefore, by the residual calculation, it flows through as a purchase of equity by the household sector. This is clearly not ideal; we would much rather have a sector "hedge funds", which--like mutual funds--holds financial assets and issues hedge fund shares that are then held by the household sector and other institutional sectors that are reportedly participating in the market. However, including foreign hedge funds in equity holdings is probably better than missing them altogether.

Caveats/Concerns: Because the data collection process relies on brokers, the financial accounts do not include transactions in offshore hedge funds that do not involve brokers. For example, if a high net worth household bypasses a broker and buys a hedge fund share directly from the offshore hedge fund, then we would presumably not see the issuance of the hedge fund share in equity issuance by the rest of the world (and therefore, the purchase would not be on the household balance sheet). However, if that same hedge fund used a broker to buy U.S. assets, those assets would still be in the rest of the world sector, thereby reducing the assets held on the household balance sheet.

Similarly, any domestic hedge funds that are purchased by foreigners would show up in net purchases of U.S. equity by the rest of the world. However, because equity issuance measured in the U.S. does not include hedge funds, these purchases would distort downward U.S. households' direct equity holdings.

In addition, the level of foreign equity (ROW liability) is calculated based on a perpetual inventory calculation which moves the level forward with price changes based on a foreign equity index (which should not include hedge funds) as well as the flow of equity (which should include the hedge fund issuance by the rest of the world).

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Q: How is the Securities Data Corporation (SDC) bond data used to calculate series FA103163003.Q in the Flow of Funds data set? Which categories of the SDC bond data do you focus on, and what are you using as a filter?

Posted: 03/07/2013

For the Flow of Funds data, we use SDC to track bonds of nonfinancial U.S. firms issued in U.S. and foreign markets. A firm is a U.S. firm if issuing subsidiary's domicile is the United States. We include both convertible and non-convertible debt issues but exclude medium-term notes (MTNs), Certificates of Deposit, Bank Notes, and government and agency bonds. MTN net issuance is tracked using a separate data source.

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Q: I have been looking at the Flow of Funds report Table F.212 - Net Issues and have some questions how the SDC Bond database is used.

Posted: 03/07/2013; Revised: 04/05/2013

The SDC Bond data from CM is used only to calculate 103163003 (corporate sector) issuance.

  1. Do you filter the SDC database on U.S.-owned corporates targeting U.S. markets, or do you filter on all (no matter if they are primarily owned by another country) corporate targeting U.S. markets?
    1. We filter the SDC database on U.S.-owned corporates targeting U.S. and foreign markets, with the domicile determined by the issuing subsidiary's domicile.
  2. Do you use the SDC database for Financial Companies?
    1. No, the financial sectors bond issuance series are not from the SDC data.1
  3. What sectors in SDC do you classify as 'Financial' (if you use SDC) and 'Non-Financial'?
    1. We use the Standard Industrial Classification (SIC) code of the issuer (not the parent) to distinguish between financial and non-financial firms. (http://www.osha.gov/pls/imis/sic_manual.html)
  4. What instruments do you consider to be asset-backed securities (ABS)?
    1. We only use the SDC bond data from Capital Markets to calculate 103163003 (corporate sector) issuance, so since this is nonfinancial data, it does not include ABS.1
  5. How are the maturity dates handled when using SDC?
    1. We do not filter out any issues based on time to maturity.
  6. How is Depository Trust and Clearing Corporation (DTCC) used
    1. DTCC is used for MTN net issuance data.

1. The answers to questions 2 and 4 originally suggested that the Flow of Funds Accounts excluded financial bonds. The text has been updated to say that the Flow of Funds Accounts do contain financial bonds, but the SDC bond data from Capital Markets is used only for the "Nonfinancial corporate business" line of table 212, which only includes nonfinancial bonds.

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Current release | Screen reader | PDF (560 KB) | Data Download Program (DDP) | Preliminary Z.1

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