Transactions of U.S.Affiliate With Foreign Parent, and Transactions of U.S. Banking Affiliate With Foreign Parent

BE-605 Bank Instructions
(REV. 2/2007)

TRANSACTIONS OF U.S. BANKING AFFILIATE WITH FOREIGN PARENT
Foreign direct investment in the United States means
the ownership or control, directly or indirectly, by one
foreign person of 10 per centum or more of the voting
securities of an incorporated U.S. business enterprise or an
equivalent interest in an unincorporated U.S. business
enterprise, including a branch.

Purpose – Reports on this form are required in order to
provide reliable and up-to-date information on foreign direct
investment in the United States for inclusion in the U.S.
international transactions accounts and the national income
and product accounts.
Authority – This survey is being conducted under the
International Investment and Trade in Services Survey Act
(P.L. 94-472, 90 Stat. 2059, 22 U.S.C. 3101-3108, as amended
hereinafter "the Act"), and the filing of reports is MANDATORY
pursuant to Section 5(b)(2) of the Act (22 U.S.C. 3104).

Branch means the operations or activities conducted by a
person in a different location in its own name rather than
through an incorporated entity.
Affiliate means a business enterprise located in one
country which is directly or indirectly owned or controlled
by a person of another country to the extent of 10 per
centum or more of its voting stock for an incorporated
business or an equivalent interest for an unincorporated
business, including a branch.

The Office of Management and Budget has approved this
survey under the Paperwork Reduction Act (44 U.S.C. 3501
et seq.).
Penalties – Whoever fails to report may be subject to a civil
penalty not less than $2,500, and not more than $25,000, and
to injunctive relief commanding such person to comply, or
both. Whoever willfully fails to report shall be fined not more
than $10,000 and, if an individual, may be imprisoned for not
more than one year, or both. Any officer, director, employee,
or agent of any corporation who knowingly participates in
such violation, upon conviction, may be punished by a like
fine, imprisonment, or both. (22 U.S.C. 3105).

U.S. affiliate means an affiliate located in the United
States in which a foreign person has a direct investment.
Foreign parent means the first foreign person in the
ownership chain of the U.S. affiliate.
Affiliated foreign group means (1) the foreign parent, (2)
any foreign person, proceeding up the foreign parent’s
ownership chain, which owns more than 50 percent of the
person below it up to and including that person which is
not owned more than 50 percent by another foreign
person, and (3) any foreign person, proceeding down the
ownership chain(s) of each of these members, which is
owned more than 50 percent by the person above it.

These penalties are subject to inflationary adjustments.
Those adjustments are found in 15 CFR 6.4.
Notwithstanding any other provision of the law, no person is
required to respond to, nor shall any person be subject to a
penalty for failure to comply with, a collection of information
subject to the requirements of the Paperwork Reduction Act,
unless that collection of information displays a currently
valid OMB Control Number. The control number for this
survey is at the top of Form BE-605 Bank.

Foreign affiliate of foreign parent means, with
reference to a given U.S. affiliate, any member of the
affiliated foreign group owning the affiliate that is not a
foreign parent of the affiliate.

Confidentiality – The Act provides that your report to this
Bureau is CONFIDENTIAL and may be used only for
analytical or statistical purposes. Without your prior written
permission, the information filed in your report CANNOT be
presented in a manner that allows it to be individually
identified. Your report CANNOT be used for purposes of
taxation, investigation, or regulation. Copies retained in your
files are immune from legal process.

U.S. corporation means a business enterprise
incorporated in the United States.
Business enterprise means any organization, association,
branch, or venture which exists for profitmaking purposes
or to otherwise secure economic advantage, and any
ownership of any real estate.

Filing of report – Form BE-605 Bank is a quarterly report.
File a single copy of each report within 30 days after the
close of each calendar (or fiscal) quarter, except for the final
quarter of the calendar (or fiscal) year, when reports should
be filed within 45 days. Direct requests for extension of the
filing date, additional forms, or clarification of the reporting
requirements or instructions to:

Banking covers business enterprises engaged in deposit
banking or closely related functions, including commercial
banks, Edge Act corporations engaged in international or
foreign banking, foreign branches and agencies of U.S.
banks whether or not they accept deposits abroad, U.S.
branches and agencies of foreign banks whether or not
they accept domestic deposits, savings and loans, savings
banks, and bank holding companies. (U.S. branches of
foreign banks are U.S. persons; conversely, foreign
branches of U.S. banks are foreign persons.)

U.S. Department of Commerce
Bureau of Economic Analysis, BE-49(Q)
Washington, DC 20230
or fax: (202) 606 5319

Voting interest is the percentage of ownership in the
voting securities of an incorporated business enterprise or
an equivalent interest in an unincorporated business
enterprise, including a branch or partnership.

Assistance – For assistance, telephone (202) 606 5577
between 8:30 a.m. to 4:30 p.m. eastern time. Forms can be
obtained from BEA’s web site at:
www.bea.gov/bea/surveys/fdiusurv.htm

GENERAL INSTRUCTIONS

DEFINITIONS

Accounting methods and records – Generally accepted
U.S. accounting principles should be followed, unless
otherwise specified. Corporations should generally use the
same methods and records that are used to generate
reports to stockholders except where the instructions
indicate a variance. Reports for unincorporated businesses
should be generated on an equivalent basis. Reference to
Financial Accounting Standards Board statements are
referred to as "FAS" statements. Report items according to
U.S. generally accepted accounting principles per books of
the U.S. affiliate, except in Part VII, where items 31–37 are
to be reported at the market value of the transaction.

United States, when used in a geographic sense, means
the several States, the District of Columbia, the
Commonwealth of Puerto Rico, and all territories and
possessions of the United States.
Foreign, when used in a geographic sense, means that
which is situated outside the United States or which belongs
to or is characteristic of a country other than the United
States.
Person means any individual, branch, partnership,
associated group, association, estate, trust, corporation, or
other organization (whether or not organized under the laws
of any State), and any government (including a foreign
government, the United States Government, a State or local
government, and any agency, corporation, financial
institution, or other entity or instrumentality thereof,
including a government-sponsored agency).

Currency amounts – Amounts should be reported in
thousands of U.S. dollars. If an amount is between ± $500,
enter "0." Use parentheses to indicate negative numbers.
Estimates – If actual amounts are not available, supply
estimates and label them as such. When a data item
cannot be fully subdivided as required, supply a total and
an estimated breakdown of the total.

Foreign person means any person resident outside the
United States or subject to the jurisdiction of a country other
than the United States.

Multiple foreign parents – If two or more foreign
persons hold direct investment equity interests in a U.S.
affiliate, a separate report should be filed to report
transactions or accounts with each foreign parent.

Direct investment means the ownership or control,
directly or indirectly, by one person of 10 percent or more of
the voting securities of an incorporated business enterprise
or an equivalent interest in an unincorporated business
enterprise.

Page 1

Pantone 262 Purple, 100% tone

Derivatives contracts – Do not report either the value of
outstanding financial derivative contracts or any payments or
receipts resulting from the settlement of those contracts.
Derivatives contracts are covered by the Treasury International
Capital (TIC) Form D—Report of Holdings of, and Transactions
in, Financial Derivatives Contracts with Foreign Residents.

GENERAL INSTRUCTIONS – Continued
Consolidation – A listing of the names and addresses of the
U.S. affiliates included in the consolidation should be provided
with the first filing and then updated as necessary. The list
should indicate each U.S. affiliate’s direct owner and the
percentage of direct ownership interest held. For an
incorporated U.S. banking affiliate, its U.S. branches should not
be listed.

Retention of copies – Retain a copy of all reports filed for 3
years beyond the report’s original due date.

A U.S. affiliate in which a direct ownership interest and an
indirect ownership interest are held by different foreign
persons should not be fully consolidated into another U.S.
affiliate, but must complete and file its own BE-605 BANK. (See
diagram below.)
Foreign person B

Revisions – File revisions to any prior period data either by
letter, if the revisions are minimal; by noting changes on a file
copy of the previously completed form; or by completing a
revised form in its entirety and refiling it. Please DO NOT make
revisions to prior quarters using ASTAR, BEA’s electronic filing
system.

Foreign person A

SPECIFIC INSTRUCTIONS

Foreign
U.S.
30%.

Part I

100%
U.S. affiliate X

A U.S. affiliate that is only indirectly foreign owned (item 7
must be marked), but is required to file a separate report on
Form BE-605 Bank because it has direct transactions or
positions with the foreign parent, should complete only Parts I,
III, IV, and V as applicable.

60%
U.S. affiliate Y
Except as described below, U.S. affiliate Y may not be
fully consolidated into U.S. affiliate X because of the 30
percent direct ownership by foreign person B.

PART II
Items 12a and 12b – Certain realized and unrealized gains and
losses include:

Reflect the indirect ownership interest, even if more than 50
percent, on the BE-605 Bank report for the directly held U.S.
affiliate on an equity basis. For example, in the situation
shown in the diagram above, U.S. affiliate X must treat its 60
percent ownership interest in U.S. affiliate Y as an equity
investment.

(1) Sale or disposition of investment securities, and FAS 115
impairment losses.
(2) Sale or disposition of land, other property, plant and
equipment, or other assets, and FAS 144 impairment
losses. DO NOT include gains or losses from the sale of
inventory assets in the ordinary course of trade or
business. Real estate companies, see below for further
instructions.

If both the direct and indirect lines of ownership are held by
the same foreign person, the affiliate may be fully
consolidated and the minority interest not held by the foreign
parent either directly or indirectly must be eliminated. Thus,
if in the diagram above, U.S. affiliate Y is 30 percent directly
owned by Foreign person A instead of Foreign person B, then
U.S. affiliate Y may be fully consolidated into U.S. affiliate X.
In this example, the 10 percent minority interest that is not
owned (directly or indirectly) by Foreign person A is
eliminated.

(3) Goodwill impairment as defined by FAS 142.
(4) Restructuring – Include restructuring costs that reflect
write downs or writeoffs of assets or liabilities. DO NOT
include actual payments or charges to establish reserves
for future actual payments, such as for severance pay
and fees to accountants, lawyers, consultants, or other
contractors.

Do not consolidate foreign subsidiaries, branches, operations
or investments no matter what the percentage ownership.
Report foreign holdings of the U.S. bank affiliate owned 20
percent or more (including those that are majority owned)
using the equity method of accounting. DO NOT eliminate
intercompany accounts for investments reported using the
equity method. You may report immaterial foreign
investments using the cost method of accounting if this
treatment is consistent with your normal reporting practice.

(5) DISPOSALS of discontinued operations. However, DO
NOT include income from the operations of a
discontinued segment.
(6) Remeasurement of the U.S. affiliate’s foreign currency
denominated assets and liabilities due to changes in
foreign exchange rates during the reporting period.

Method of accounting for equity investments in business
enterprises that are not fully consolidated – A U.S.
affiliate’s equity investment in all foreign business enterprises
and in U.S. business enterprises that are not fully consolidated
should be accounted for as detailed below. Foreign business
enterprises must not be fully consolidated with the U.S. affiliate
no matter what the percentage ownership. When equity
investments are included under the equity basis, intercompany
account items MUST NOT be eliminated.
Generally, investment in those business enterprises owned 20
percent or more (including those that are majority-owned)
should be reported using the equity basis. However, immaterial
investments may be reported using the cost basis provided this
basis is consistent with normal reporting practice. Investment in
those business enterprises owned less than 20 percent
normally should be reported using the cost basis.
Aggregation of branches and agencies – All U.S. banking
branches and agencies (including IBF’s) directly owned by a
given foreign parent may be aggregated on a single Form
BE-605 Bank. Operations of branches that are separately
chartered offshore, in the Cayman Islands or the Bahamas, for
example, are not to be reported on Form BE-605 Bank, because
they are considered to be foreign branches of the foreign
parent.

(7) Extraordinary, unusual, or infrequently occurring items
that are material. Include losses from accidental damage or
disasters, after estimated insurance reimbursement.
Include other material items, including writeups,
writedowns, and writeoffs of tangible and intangible
assets; gains (losses) from the sale or other disposition of
capital assets; and gains (losses) from the sale or other
disposition of financial assets, including securities, to the
extent not included above.
Special instructions for real estate companies.
Report gains or losses from the sale, disposition, or
revaluation of land, other property, plant, and equipment,
or other assets as follows: (1) Realized gains and losses –
Include gains or losses from the sale of real state in the
ordinary course of business in item 11. DO NOT report
these gains or losses in items 12a or 12b. (2) Impairment
of long-lived assets – Include impairment losses, as
defined by FAS 144 and recognized during the period, in
item 11. (3) Unrealized gains – Include gains recognized
due to the revaluation of real estate assets in item 12a.
PART III – PART VIII
Instructions for these questions are located on the form.

BE-605 BANK INSTRUCTIONS (REV. 2/2007)

Pantone 262 Purple, 100% tone

Page 2