23 DECEMBER
NEW ZEALAND GAZETTE
4661

(3) The Commodity Price Swap agreement entered into between A and C contains two notional arrangements. One financial arrangement consists of the obligation of A to pay an amount equal to the prevailing market price for the commodity in each of 36 months, and the other arrangement consists of a right in A to receive a fixed amount in respect of the same 36 months. This determination provides the method for recognising income or expenditure under these financial arrangements.

(4) It is assumed that the financial arrangements described above will be performed without amendment in accordance with the terms of the documents disclosed to the Commissioner prior to the issuing of this determination.

(5) It is assumed that the amount of income derived or expenditure incurred as calculated pursuant to this determination and under section 64B to 64M of the Act in relation to the commodity price swap agreement, will be equivalent to the net expenditure incurred or income derived (as the case may be), calculated in accordance with this determination and sections 64B to 64M of the Act, arising under the Forward Commodity Purchase agreement and the Base Currency Loan. The overall net effect should, in the absence of other income arising otherwise than under these financial arrangements, result in A being in a tax neutral position in respect of these financial arrangements in each year.

5. Interpretation—(1) In this determination, unless the context otherwise requires,—

“the Act” means the Income Tax Act 1976;

“Base Currency” in relation to a financial arrangement means the currency in which the rights and obligations under the financial arrangement are fixed;

“Base Currency Loan” refers to a Base Currency Loan entered into between A and C to the extent of an amount equal to the purchase price payable on 8 December 1992 by A to B under the Forward Commodity Purchase agreement;

“Commodity Price Swap agreement” means the commodity price swap agreement executed between A and C on 7 December 1992 in the form disclosed to the Commissioner prior to the issuing of this determination;

“Exchange Rate” means the price of one currency expressed in another currency;

“Forward Commodity Purchase agreement” means a document entered into between A and B for the forward purchase of commodity where payment is received in full at the time the contract is entered into;

“Market Price” means the index price for commodity in a recognised market calculated as the average of the spot prices for any month in which it is necessary during that month to fix a market value;

“NZD” means the currency of New Zealand;

“Separate Agreement” means an agreement between A and B entered into on 7 December 1992 containing schedules of delivery;

“Spot Rate” means the Exchange Rate for a spot contract as defined in Determination G6D: Foreign Currency Rates; and

“Value” in respect of any obligation expressed in a Base Currency means the amount outstanding in respect of any obligation to pay or right to receive any amount of that Base Currency; and in respect of any outstanding obligation to deliver commodity, or to pay an amount equal to or calculated by reference to an outstanding obligation to deliver commodity, or the right to receive outstanding deliveries of commodity, or an amount calculated by reference to an outstanding obligation to deliver commodities, the value of those rights or obligations shall be determined by applying the market rate at the relevant time to the base quantities of commodity outstanding undelivered at that time.

(2) Any reference in this determination to another determination made by the Commissioner shall be construed as referring to any fresh determination made by the Commissioner to vary, rescind, restrict, or extend that determination.

(3) For convenience, words and phrases defined in this determination are indicated by initial capital letters, but the absence of a capital letter shall not alone imply that the word or phrases are used with a meaning different from that given by its definition.

6. Method—(1) In respect of the Forward Commodity Purchase agreement, the purchase price shall be apportioned to each monthly delivery of commodity by determining the proportion of the scheduled amounts to be delivered in each month in accordance with a schedule to the Separate Agreement to the total base quantities of the commodity to be delivered over the 36 months and applying those proportions to the purchase price paid for those commodities in December 1992.

(2) The amount of the core acquisition price of the Forward Commodity Purchase agreement, is to be determined in accordance with sub-paragraph 64BA (1) (c) (i). In relation to the Forward Commodity Purchase agreement the lowest price agreed and which would be agreed by the parties in accordance with that sub-paragraph is the Market Price in a recognised market for any month. That price is determined monthly in relation to the deliveries made in that month.

(3) The amount of income derived or expenditure incurred by A as issuer and B as holder under the Forward Commodity Purchase agreement shall be calculated in accordance with the following formula:

a + b + c - d - e - f

Where:

a = the value in NZD of the amount of the commodity, calculated by reference to the Market Price in the month the Forward Commodity Purchase agreement was entered into, which is yet to be delivered as at the beginning of any year; and

b = the value in NZD of the amount of the commodity calculated by reference to the Market Price in the last month of any year in respect of commodity that is yet to be delivered as at the end of any year; and

c = the value in NZD of the amount of commodity delivered by reference to the Market Price in the month of delivery in respect of deliveries that month and converted into NZD as at the last day of that month; and

d = the value in NZD of the amount of the commodity undelivered calculated by reference to the Market Price at the beginning of any year;

e = the value in NZD of the amount of the commodity undelivered as at the end of any year calculated by reference to the Market Price in the month the Forward Commodity Purchase agreement was entered into; and

f = the proportion of the purchase price apportioned to the deliveries made during any month of the year converted into NZD at the last day of any month in which deliveries are made

and the amount so calculated shall: