E.5. Number of enterprises
15.82. The preferred measure is number of enterprises, but data should reflect the number of statistical units, that is, enterprises or establishments, that correspond to the data described for other variables. It is a basic indicator of the prevalence of control by foreigners in the host economy. Only enterprises with a genuine economic activity should be taken into account in these statistics. . Firms with no activity, but that simply set up an office in a country for the purpose of transferring funds or taking advantage of certain tax breaks, should be excluded.
15.83. Although the data compilation of the number of enterprises variable is considered to be a by-product of FATS data collection and compilation, a number of considerations must be taken into account, such as determining if units have been active during the period under consideration. In addition, the number is likely to be affected, often significantly, by the level of company consolidation and by thresholds for reporting on surveys. Given that, for outward FATS, the data is often reported by one unit on behalf of a group of affiliates (e.g., country head office or regional office), it is important to ensure that data are reported and compiled on a non-consolidated basis. Consequently, to avoid any problem with interpretation if data do not reflect the above-mentioned principles, it is important to clearly document any deviation in available metadata. Whatever measure is retained to assist users in interpreting counts of units (whether enterprises or establishments), compilers are also encouraged to document how the numbers were derived.
15.84. The European Union FATS Recommendations Manual provides further indications as to how this item could be compiled. It states that “only active units which had turnover or employment at any time during the reference period should be included. Dormant (temporarily inactive) and inactive units are excluded. This statistic should include all units active during at least a part of the reference period” (box I.19). It also indicates that not only separate legal entities that are dependent on foreign enterprises but also “local units (branches) which do not constitute a separate legal entity and which are dependent on foreign enterprises…” (ibid.) should be included. In other words, if they are considered to be branches (i.e. they meet the branch criterion; see, for example, chapter 14, on construction) then their operations in the country of establishment should be reflected in FATS and they should be counted. But if they do not considered branches, then those operations should not be accounted for in FATS, and its sales will be recorded as imports/exports under the relevant BOP services item. The Manual also states that, in the context of outward FATS, the number of enterprises is a characteristic that, in principle, is obtained by counting the units in the target population, although, in practice, there can be collection problems when a resident parent enterprise supplies information on the activity of many affiliates abroad. The respondent may, for example, group affiliates located in the same foreign country as a single enterprise.
 Note that HEGI also recommends the compilation of the number of consolidated enterprises (see HEGI para. 267 for more information).