WPFS – 29 November -1 December 2010

By Michèle Chavoix-Mannato STD/NAD

1. Background for the Survey on Valuation of Shares

2. Content and Main results3. Replies to General Questions4. Replies to Specific Questions5. Replies to Additional Questions6. Conclusion

November 2008 2

In the SNA 1993, there is no reference to specific issues or methods regarding the valuation of shares

In the SNA 2008, various methods of valuation are proposed and defined

The 2010 survey is an update and a complement of the questionnaire launched in 2006 and limited to:◦ two sectors

◦ three categories of financial instruments The 2010 survey deals with more specific questions

regarding the method used to value quoted and unquoted shares

General questions◦availability of data by type of shares and equities◦link between flow data and stock data◦link between assets and liabilities◦consistency between SNA data and other sources

Specific questions◦sources of the data ◦method of valuation ◦compilation of unquoted shares

Additional questions◦investment funds shares

Replies from most OECD countries, including new Members, and Estonia

No replies from six countries◦ Iceland, Ireland, Japan, Korea, Mexico and New Zealand

Good quality of the replies Large amount of information collected in the

2010 survey Great disparity in data availability, methods used

and classification followed

There is a split of ‘Shares and other Equity’ (F51) in a large majority of countries

Stocks are the starting point for computing transactions in most countries:◦stock data are based on a security-by-security

approach

◦the sources for stocks provide also counterpart information

◦the methods used to derived transactions from stocks vary between countries, between instruments and between sectors.

Data are most often available for both the asset and liability side◦but generally the liability side is the most reliable

There is a full consistency between Financial Accounts, BoP statistics and IIP statistics◦but differences exist in the valuation or

compilation methods or in the breakdown of F5 Micro data are used to compile macro data

in most OECD countries◦but , this link is possible for a limited number of

sectors

Valuation for quoted shares (F511) ◦ the most commonly used method is the market

value for assets and liabilities

◦ the method may differ for flows and stocks depending on the sector

and depending on the side of the accounts

Valuation of unquoted shares (F512)◦ Countries which use the method recommended by

Eurostat apply similar criteria regarding the exclusion of specific quoted companies, the number of branches used to evaluate the stocks

of unquoted shares, the average of the ratio of capitalisation the eventual use of a liquidity ratio differ from

country to country

Valuation of unquoted shares (F512)◦ Most countries follow, or will follow, the Own

Funds at Book Value (OFBV) method, one of the methods recommended in the SNA2008

◦ In some countries, a combination of two methods is applied

◦ A few countries have not yet decided which method they will use

Breakdown of the instrument F52 ◦Money Market Funds shares data are available in

a large majority of OECD countries

◦the split between other types of investment fund shares is less frequent

◦the breakdown between listed and unlisted investment fund shares is very rare

Valuation of the instrument F52 ◦all countries value investment fund shares (F52)

at market prices, except two countries

Classification of securitisation units’ equity◦for many respondents, this question is irrelevant

◦for others, there is no common method to classify these units which can be: under F51 (2 countries) under F52 (3 countries) under F3 (4 countries) Others (2 countries)

Taking into account the large amount of information but also the great diversity in replies, it is envisage to convene a Workshop ◦to improve our knowledge and to better

understand the methods used by countries monographic presentations by countries discussions on the best practices

◦to work towards common classifications, definitions and methods in order to increase international comparability of financial accounts.

Workshop on Valuation of Equity be organized in the same manner as the Workshop on Securitisation◦ in an OECD country which will

host the meeting prepare the agenda

◦ with the assistance of the OECD which will launch the call for papers and track them be responsible for administrative tasks

Delegates are invited

• to discuss some important aspects on the methods used by the OECD countries

• to agree on the proposal of a Workshop on Valuation of Shares to be organised in 2011

• to inform the Secretariat on their readiness to host and prepare this Workshop.