How is loan recorded on Balance of Payments? (1 Viewer)

[swagmeister]

So with the Balance of Payments, one thing that I didn't go into such comprehensive detail with is how a loan (foreign debt) or investment (foreign equity) is recorded on the balance of payments as the relevant process occurs.

For this scenario, lets just assume that the money is coming into Australia.

With a loan, the initial value of it is positive on the KAFA (Financial Account section). Then, as it is paid back, the value of the loan becomes a negative value on the KAFA. The interest payments are what contribute to an increased CAD through the Net Primary Incomes Section.

In terms of foreign equity investment though, how does the 'reversible' part work - dividends (from company profits) go on the Net Primary Incomes section, so what actually ends up being 'reversed' if you will - cause the KAFA captures all reversible transactions.

I am either wrong in terms of my explanation of a loan, maybe the whole thing goes in Net Primary Incomes, or am missing something with in terms of foreign equity. Anyone have any thoughts?

Cheers,
swagmeister

 

[Evertone]

Loans are paid back but investments are not. Investments are treated as assets, so there is no 'reversible part' to begin with.

If they want to liquidate their share (which must be above 10%) then the company can buy its shares back, so it will be treated as a debit on the financial account.

 

[StephenLewisreuw]

it's added to your bank account

 

[Velocifire]

Wow 5 years later!

 

[williams1002]

it's added to your bank account

I suppose so...