Activities of Foreign Majority-Owned Affiliates in Canada

Detailed information for 2016

Status:

Active

Frequency:

Annual

Record number:

5230

The Activities of Foreign Majority-Owned Affiliates in Canada describes the characteristics, activity, financial position and performance of Foreign Majority-Owned Canadian Affiliates (FMOCAs) of foreign multinational enterprises. Inward Foreign Affiliate Statistics (FATS) are an extension of statistics on Foreign Direct Investment (FDI) in Canada.

Data release - November 14, 2018

Description

The objective of this statistical program is to measure the economic and financial activity of foreign majority-owned affiliates in Canada. These data provide further insight on the effects of foreign direct investment in Canada and on the impact of foreign multinationals on the Canadian economy. They are used by policymakers to negotiate and monitor trade and investment agreements. This information is also necessary to meet Canada's statistical obligations to supranational organizations, such as the Organization for Economic Co-operation and Development (OECD).

The conceptual framework is derived from the FDI concepts. The activities of Foreign Majority-Owned Canadian Affiliates (FMOCAs), also referred to as inward Foreign Affiliate Statistics (FATS), fall under the notion of majority ownership within the universe of direct investment enterprises, where one foreign direct investor owns more than 50 percent of the voting shares. The universe of FMOCAs includes these Canadian direct investment enterprises as well as their majority-owned Canadian subsidiaries.

The analytical variables describing the activities of these FMOCAs include: assets, liabilities, shareholders' equity, operating revenues, operating expenses, operating profit or loss, employment, trade in goods and commercial services, intramural research & development expenditures, research and development personnel, international technological receipts and payments, and value added.

These analytical variables are presented according to two dimensions, geography and/or industry. For the geographical dimension, two bases are used to present the different variables, the country of the immediate investor and the country of the ultimate investor. The immediate investing country shows the first foreign country of inter-company claims. The ultimate investing country indicates the economy from which the investment ultimately originates and where the control resides through layers of inter-corporate ownerships. The development of both the immediate and ultimate investing country frames serve as the basis for producing inward FATS from a foreign investor perspective, as required by the latest international standards.

For the industrial dimension, analytical variables are presented based on the industry of the FMOCAs at the 2-digit level (3-digit level for certain sectors) using North American Industry Classification System (NAICS) 2012. The tables on enterprise structures derive NAICS from Annual Financial and Taxation Statistics (AFTS), while the establishment table (36-10-0451-01) derives NAICS from Survey of Employment, Payroll and Hours (SEPH).

Reference period: Calendar year

Collection period: The information is collected as the data sources become available, generally in the year following the reference year.

Subjects

  • Balance of international payments
  • Economic accounts

Data sources and methodology

Target population

The target population consists of Canadian direct investment enterprises of which one of their immediate foreign parent companies owns more than 50% of the voting shares. In addition to these direct investment enterprises the target population also includes their majority-owned subsidiaries operating within the Canadian economy.

Foreign Affiliate Statistics (FATS) are based on majority ownership concept under the FDI framework. It focuses on the threshold where foreign majority ownership is established. The ownership of more than 50% of the voting shares as defined by FDI concepts is used internationally to define the FATS universe of enterprises. The FDI concept of influence also includes ownership of 10% to 50% of the voting shares, but this segment is presently excluded from this program. Ownership below the 10% level of voting shares is not FDI and is referred to as portfolio investment. It is out of scope for this program.

The primary statistical unit used for this program is the enterprise. An enterprise is defined as the organizational unit of a business that directs and controls the allocation of resources relating to its domestic operations, and for which consolidated financial and balance sheet accounts can be derived. Statistics Canada tables 36-10-0445-01, 36-10-0447-01, 36-10-0582-01, and 36-10-0356-01 are based on enterprise level information.

For both goods imports and domestic exports, custom basis values are used as the total economy measure to analyze the FMOCAs' trade activities. The identification of FMOCAs' goods exports is done via linkage to the Trade by Exporter Characteristics - Goods program (TEC), while goods imports is done via linkage to the Trade by Importer Characteristics - Goods program (TIC), both of which cover the majority of total domestic exports and imports. Please refer to the following Statistics Canada tables for the total economy levels with respect to goods imports and domestic exports (12-10-0002-01), commercial services imports and exports (36-10-0006-01), employment (14-10-0202-01), intramural research and development expenditures (27-10-0333-01), research and development personnel (27-10-0337-01).

International technological receipts and payments covers activities related to patents and industrial design, trademarks, franchises, copyrights and related rights, research and development, and other technical services. The national economy totals can also be found in table 36-10-0006-01.

The universe used in the compilation of financial variables covers all the enterprises in the corporate sector. These variables are calculated using a business accounting basis. Compared to the Annual Financial and Taxation Statistics Program, whose target population excludes enterprises classified under the 2012 North American Industry Classification System (NAICS) to Management of Companies and Enterprises (NAICS 55), Religious Organizations (NAICS 8131), Political Organizations (NAICS 81394), Public Administration (NAICS 91), as well as Funds and other Financial Vehicles (NAICS 526), it includes all the business entities who are considered to be majority-owned by foreign investors based on a variety of data sources.

Value added is presented at basic prices on a national accounting basis. As compared to the business accounting, national accounting values depreciation and inventories using different methods. Depletion, bad debts, charitable donations, dividends, and capital gains/losses are not recognized as expenses or revenues for national accounting as they are for business accounting. All current expenses related to software, mineral exploration and research and development are capitalized for national accounting.

The population consists of the corporate sector, which normally includes legally constituted corporations, cooperatives, limited liability partnerships, notional residential units and quasi-corporations.

Value added is calculated using an income-based approach, summing compensation of employees, gross operating surplus, and indirect taxes less subsidies on production. The corporate total for Canada can be found in table 36-10-0356-01.

Instrument design

This methodology does not apply.

Sampling

No sampling is done for this statistical program.

Data sources

Data are extracted from administrative files and derived from other Statistics Canada surveys and/or other sources.

The primary data sources used to identify the FMOCAs include Canada's International Investment Position statistical program (record number 1537, more specifically BP-FIC questionnaire), various tax schedules (T106, T2 schedule 9 and 19), Corporations Returns Act (Inter-corporate Ownership-ICO database, record number 2503), and the Balance of Payment statistical program (record number 1534, more specifically BP22 and BP28 questionnaires).

The balance sheet and income statement variables as well as the industry classification are sourced from the Annual Financial and Taxation Statistics (AFTS, record number 2510). The employment and other operating characteristics of the FMOCAs are from the Survey of Employment Payroll and Hours (SEPH, record number 2612), the International Merchandise Trade program (custom basis imports, record number 2201), the Trade by Exporter Characteristics - Goods program (TEC, record number 5124), Canada's International Transaction in Services (record number 1536), and the Annual Survey of Research and Development in Canadian Industry (RDCI, record number 4201).The compilation of these descriptive variables is subject to the information available from the sources programs.

For the value added variable, data is sourced, and methodology and concepts are available, from the National Economic Accounts Division (NEAD, record number 1303).

Records from the sources programs that are not available at the enterprise or establishment level are treated as non-FMOCAs by default.

Error detection

Information on error detection methods applied to each of the individual data sources used in this statistical program can be found via links to the record numbers listed in the Data Sources section.

One additional aspect of error detection consists in identifying at which level within the enterprise structure the various data sources are available. In order to harmonize the information and ensure consistency across data sources, it is necessary to identify the common reporting entity within the enterprise structure using the consolidated reporting structure maintained by the Business Register. Data for single legal entities belonging to a corporate family are rolled up to the consolidated enterprise level.

As multiple data sources are used, validation of firm identification and corporate structure is also carried out to ensure consistency across reference years. In case of discrepancies among the data sources, manual editing is done to harmonize the information.

Imputation

This methodology does not apply.

Estimation

Some values were estimated for the survey population related to data sources on international transactions in commercial services and custom basis imports.

For commercial services, original survey weights related to this data source were adjusted to reflect foreign ownership characteristics while maintaining the overall service trade value at the total economy level.

Quality evaluation

Data are analyzed for consistency against their own historical trend, with trends observed in relation to other Statistics Canada data series, and general trends in the economy. Analysis is also conducted to address potential discrepancies between the estimates based on administrative records and survey results.

When available, some inward FATS variables are validated against official outward FATS published by other foreign national statistics agencies and by the Organization of Economic Development (OECD) for data confrontation purposes.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Revisions and seasonal adjustment

In accordance with the revision policy in place in the Canadian System of Macroeconomic Accounts, revisions are carried out each year and generally only impact the time series for the last three reference years (years T-1, T-2 and T-3). However, due to different revision schedules in place for each of the individual data sources used in this statistical program, it is possible that for some variables, data might not be revised according to this general policy.

Data accuracy

This statistical program is derived from a record linkage exercise. Please refer to the IMDB entries of each individual data sources used in this program for more information on their data accuracy measures.

In the case of International technological receipts and payments, these variables are constructed using primarily Canada's International Transactions in Services and are supplemented by RDCI data.

In addition, certain balance sheet variables associated to FMOCAs in the Management of companies and enterprises industry (NAICS 55), such as assets, liabilities and equity can be overstated. This occurs for the FMOCAs in this industry that are not in a consolidated corporate structure. In such cases, no adjustment has been made to correct for the potential double counting as it has been difficult to evaluate. In the case of round-tripping, which refers to the FMOCAs whose immediate investor is foreign but the country of the ultimate investor is Canada, this population may be underestimated due to the consolidated financial reporting requirement by the data source program. These firms will be further investigated in the future.

Software used: SAS, SAS Enterprise Guide, Excel

Documentation

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