Overview of questionnaire changes Gill Sanderson, Neil Bannister, & Ciara Williams-Fletcher

Overview IntroductionTestingConceptual ChangesSection by section changesSEFT Questionnaire

INTRODUCTION & CONCEPTUAL CHANGES

Overview of changes Number of new questions 7 Number of amended questions 22 Number of questions with no change 19 Total number of questions current questionnaire 45 Total number of questions on new questionnaire 48

The testing process to date Scope requirements Requirements scoped from both the BPM6 and ESA10 manuals August – October 2011 First wave of testing January 2012 first wave of cognitive testing started SEFT Redesign of the SEFT Questionnaire to make it more user friendly and ensure it contains the changes to the paper questionnaire. Second wave of testing April 2012 second wave of testing started

Testing going forward Respondent feedback Seminar with respondents in June Third wave of testing ? Assess the need for a Wave 3 August 2012? Finalise the questionnaire October 2012 Questionnaire goes live! Questionnaire will go live in April 2013 for both the quarterly and annual data collection

Conceptual changes Voting power Affiliate Fellow Enterprise Debt

Voting Power FROM voting share capital TO voting power BPM6 states the change as: Voting capital is obtained through the purchase of equity in a company, however it is possible to have voting rights which are not proportional to the equity ownership (i.e. golden shares). The term voting power encompasses this additional voting right. Impact? A change in the terminology throughout the form.

Affiliate The current questionnaires uses the term subsidiary and associate interchangeably throughout the form. For clarity we have removed the term subsidiary and associates from the questionnaire and use the umbrella term ‘affiliate’. For reference: subsidiaries (where the investor holds more than 50% of the voting power) and associates (where the investor holds between 10%-50% of the voting power) From a Inwards viewpoint: An immediate foreign affiliate company is the first foreign company where your company holds at least 10% of the voting power. This is outlined at the beginning of section B (Page 4 on Inwards & Outwards) ‘

Fellow Enterprises: Inward Where parent is foreign, loans between UK enterprise B and foreign enterprise C are regarded as inward direct investment Parent (A) Subsidiary (B) UK Abroad 100% 40% Subsidiary (C) Loan Abroad

Fellow Enterprise (Sister Company) The requirements are an extension on the previous legislation which required the inclusion of Fellow Enterprises on the 2010 questionnaire Not asked on the outwards questionnaire because it is deemed no longer relevant due to the chain of ownership. The new requirements necessitate that Fellow Enterprises are treated the same as an affiliate. There is no Fellow Enterprise specific routing on the new questionnaire.

Debt The current term Loan Capital has been replaced on the new questionnaire with the term debt. It was deemed that ‘loan capital’ was an out or date term and not well understood. While the term debt is more up to date. This change has been made throughout the new questionnaire

SECTION B – BUSINESS STRUCTURE Page 4 of the questionnaire

Section B – Definition page

SECTION C – IMMEDIATE FOREIGN PARENT COMPANY, HEAD OFFICE OR FELLOW ENTERPRISE DETAILS Page 6 of the questionnaire

Section C – New question 11 New question (only on the inwards questionnaire) Reason: allows ONS to indentify if the foreign entity is a fellow enterprise.

Section C – Amended question 15 on inwards and question Q12 on outwards Current (question 11 inwards - question 13 outwards) Amended Reason: This is an example of a number of conceptual changes 1) voting power 2) affiliate

Section C - New question 16 inwards and question 17 outwards Removed the 3 routing variables and now just route Branches no need for the old fellow enterprise question as they are treated the same as an affiliate. Replaces the questions 16– 18 on the current Questionnaire, and questions on outwards

SECTION D – EARNINGS AND DIVIDENDS Page 7 – Inwards Page 8 - Outwards

Section D - Amended Question 17 inwards and 18 outwards Addition of the ‘or’ so can provide either a profit or a loss Current Q19 Inwards, 21 Outwards Withholding Taxes, Tax Credits and Tax Refunds have been kept on the form Amended question

Section D – Amended question 22 on Inwards, 23 Outwards Current question Amended questions

Section D – Routing question moved Section D is now followed by Quoted Equity Capital Transaction and Balances Sheet Section. Therefore we have moved the quoted and unquoted question to the end of section D. Question 23 inwards and 24 outwards

SECTION E – QUOTED EQUITY CAPITAL TRANSACTION AND BALANCES SHEET Page 8 inwards Page 9 outwards

Section E – Market Value Opening and Closing Balances New questions 25, 29 inwards and 26 & 30 outwards. Reason : Market value is the preferred conceptual basis to measure both direct investment positions and transactions where equity is listed on a stock exchange

Section E – Question 27 inwards and 28 outwards Gains and losses changes to increase and decrease as an update in the terminology Addition of the ‘or’ to ensure provision of either a increase or a decrease for the affiliate and it’s consolidated group. Current question (31 Inwards)Amended question

Section E – Question validation Amended question 28 inwards, 29 outwards. Addition of calculation to assist in answering the question and validating the response to associated questions on the questionnaire

SECTION G – PREFERENCE SHARES AND DEBT ATTRIBUTABLE TO THE IMMEDIATE FOREIGN PARENT COMPANY Page 13 inwards Page 14 outwards

Section G – Question 36 on inwards and 37 outwards Change loan capital to debt Addition of the term ‘or’ so either an increase or decrease in debt is provided for the consolidated group Current question 26 inwards 28 outwards Amended question

Section G – Question 37 inwards 38 outwards Addition of the term debt, replacing loan capital Inclusion of validation formula Current question Amended questions

SECTION H – BALANCE SHEET, INTERCOMPANY LOANS AND ACCRUED INTEREST Page 15 Inwards Page 16 Outwards

Section H – Question 39/40 inwards, 40/41 outwards Insurance technical reserves (also referred to as insurance technical provisions) are provisions made by insurance companies for: prepayments of premiums (i.e. premiums received but not yet earned) claims incurred but not yet paid claims reported but not yet resolved estimates of claims incurred but not yet reported future benefits payable to holders of life insurance and with-profits endowment policies.

SECTION I – BRANCH EARNINGS, ASSETS AND LIABILITIES Page 16 inwards Page 17 outwards

Branch Definition Current Definition For the purpose of the FDI a branch is: a permanent establishment as defined for taxation proposes. It has no separate capital structure and its accounts form part of those of the Head Office. New Working Definition For the purpose of the FDI a branch is: A permanent establishment but not a separate legal entity Has the provision to provided either a complete set of accounts or the possibility of compiling a meaningful, from both a economic and legal viewpoint, set of accounts.

Branch Definition Head Office Branch Flows UK Economy Economy 2

Section I – Question 41 inwards, 44 outwards Current question Amended questions

Section I – New questions on remittances Question 42 inwards, 43 outwards Reason : ONS needs to be able to calculate branch reinvested earnings. This can be done by subtracting the remittance from the profit/ loss figures in the previous question.

Section I – New questions on branch assets and liabilities Question 43 & 46 inwards, 44 & 45 outwards The Reason: The regulations now require branch data to be collected under an asset and liabilities principle.

Section I – Simplification of branch current account questions Current Questions Amended questions 45 & 46 inwards 46 & 47 outwards

SEFT QUESTIONNAIRE

SEFT Overview Currently in the process of being redeveloped Second wave of internal testing of the spreadsheet Testing with randomly selected companies

SEFT Changes Same order as the paper questionnaire Reduced number of tabs – streamlined. Validation prevents answering of later questions until correct data is included. Compacted the structure to remove gaps between questions – easier to program. Hoverable help function over each question Added more useful instructions and informative error messages.

SEFT questionnaire