3544 NEW ZEALAND GAZETTE No. 154

are the amounts calculated above and total NZD
—18,533,588.

The Base Price Adjustment is therefore:

128,356,205 — (109,090,909 + —18,533,588) = NZD
37,798,884.

Being a positive amount in respect of the corporate issuer,
this amount is deemed to be expenditure incurred by the issuer
in this income year.

This determination is signed by me on the 19th day of July
in the year 1988.

R. D. ADAIR, Deputy Commissioner of Inland Revenue.

go9793

Determination G9: Financial Arrangements that are Denominated in a Currency or Commodity Other Than New Zealand Dollars

This determination may be cited as “Determination G9:
Financial Arrangements that are Denominated in a Currency
or Commodity other than New Zealand Dollars”.

1. Explanation (which does not form part of the determination)

(1) This determination resinds and replaces Determination
G8: Financial Arrangements that are Denominated in a
Currency or Commodity other than New Zealand dollars,
made on 19 July 1988.

(2) This determination sets out a method for calculating the
income or expenditure in respect of a financial arrangement
where any rights and obligations of the parties are expressed in
a “base currency” other than New Zealand dollars; this base
currency might be a foreign currency or a commodity.

(3) The method used is essentially the base price method set
out in Chapter 9 of the Consultative Document on Accrual Tax
Treatment of Income and Expenditure (Government Printer,
October 1986). Income or expenditure is calculated for each
income year in accordance with the Act and other
determinations where appropriate (for example G3), in the
base currency.

(4) This income or expenditure, together with the opening
tax book value and adjusted for amounts paid or received
during the income year, is used to calculate the closing tax
book value of the financial arrangement as at year end. In the
case of a conventional loan, this closing tax book value is
equivalent to the outstanding principal and accrued interest
under the loan as at year end, in the base currency. This
closing tax book value is converted to New Zealand dollars at
the spot rate applicable at that date.

(5) The income or expenditure in New Zealand dollars is
determined from:

(a) The amounts paid and/or received during the income
year, converted to New Zealand dollars on the dates of
payment; together with

(b) The net change in the amount of closing tax book values
in New Zealand dollars during the income year.

This brings to account for income tax purposes all accrued
gains and losses on the financial arrangement, including gains
and losses arising from currency translation.

(6) This determination requires that where a financial
arrangement involves or is expressed in more than one
currency or commodity, each separate currency or commodity
tranche is to be treated as a separate financial arrangement.

(7) Where—

(a) A facility provides for the rollover of a financial
arrangement; and

(b) No payment under any arrangement arising from the
rollover is material to or contingent upon the financial
arrangement,

any arrangement that includes the payment is a part of the financial arrangement.

(8) This determination corrects clause 6 (1) of
Determination G8: Financial Arrangements that are
Denominated in a Currency or Commodity other than New
Zealand dollars, with consequential changes to the examples.

2. Reference

This determination is made pursuant to section 64E (1) (b) of the Income Tax Act 1976.

3. Scope of Determination

(1) This determination shall apply where it is necessary to calculate the income or
expenditure of a person in respect of a financial arrangement
and any right or obligation of the person in relation to the
financial arrangement is fixed or otherwise determined in a
currency or commodity other than New Zealand dollars (NZD)
and is not fixed in NZD.

(2) This determination shall not apply to—

(a) A forward or future contract;

(b) A futures contract;

(c) A swap contract;

(d) An option;

(e) A security arrangement;

or to any agreement for the sale and purchase of property.

4. Principle

(1) Income or expenditure shall be calculated in the base currency or commodity in accordance with the Act and determinations, as if the base currency or commodity were NZD.

(2) Amounts paid or received during an income year shall be
converted to NZD at spot rates at the time of the payment or
receipt.

(3) At the end of each income year the closing tax book value
is calculated in the base currency equal to—

(a) The closing tax book value (if any) in relation to the
previous income year;

Plus (b) Amounts paid by the holder or received by the
issuer (as the case may be) during the income year and in
relation to the financial arrangement;

Plus (c) Income or expenditure calculated as in clause 4 (1)
of this determination;

Less (d) Amounts received by the holder or paid by the
issuer (as the case may be) during the income year in
relation to the financial arrangement.

(4) The closing tax book value is converted to NZD at the then
spot rate and the net change from the previous income year is
brought into income or expenditure for the income year.

(5) The total income or expenditure is the sum of the amounts
calculated in clauses 4 (2) and 4 (4) of this determination.

(6) For the purpose of determining the income deemed to be
derived or expenditure deemed to be incurred in respect of a
financial arrangement that involves separate amounts
expressed in more than one currency or commodity and in
respect of an income year, the financial arrangement shall be
treated as separate financial arrangements in relation to each
separate amount.

5. Interpretation

In this determination, unless the context otherwise requires—

Expressions used have the same meanings as in the Act,
except that where there is a conflict between the meaning of an
expression in sections 64A to 64M of the Act and the meaning
of the expression elsewhere in the Act the expression shall
have the same meaning as in the said sections 64A to 64M:

“The Act” means the Income Tax Act 1976;

“Base currency” in relation to a financial arrangement means