Data issues

15.55    There is no balance sheet source data from small non-financial corporations; solicitors and similar trust funds; and financial auxiliaries (such as stockbrokers), some of which buy securities on their own account.

15.56    Certain market practices result in commercial accounting data that are difficult to interpret within a 2008 SNA accounting framework. Under 'exposure' or 'hedge' accounting, the emphasis is on the net effect of various contractual obligations on profits and net worth; the practice is extended by bundling together contracts associated with a particular deal or strategy, and recording the net results at that level of detail.

15.57    This accounting practice for contracts involves foreign-exchange risk. An example is the issue of debt security liabilities which are (a) denominated in US dollars; (b) issued to investors in the USA; and (c) bundled with the contracts hedging foreign currency risk, such as a USD-AUD derivative, negotiated with an Australian bank. The outcome of this bundling is that there is no foreign currency exposure resulting from the combination. The problem that bundling poses for recording in the financial accounts is that it is netting two contracts with different contractual parties in different sectors. In this example, they are in different countries where one contract is a liability, and the other is in an asset position potentially. The bundled result cannot be sensibly aggregated with any particular asset class or under any sector classification, and, hence, cannot contribute usefully to economic analysis.

15.58    Another example of bundling of contracts for a net result is the notion of structured finance, where various combinations of debt, equity and derivatives can be bundled to give a tailored outcome, quite often associated with tax effective outcomes. The results can also be represented as ''hybrid'' or ''synthetic'' securities. Another practice with similar aims is ''stapled securities''.

15.59    For the financial accounts, the data in respect of structured products, bundled products and contracts reported under exposure methods is to unbundle and classify the components on the basis of the legalities of the situation, not the economic effect. The overall economic effect of such contracts will be reflected in the aggregate balancing items in the national accounts, reflecting accurately the operating surplus; property income flows; financial transactions; revaluations and net worth that result and also provide the basis for how those outcomes evolved.