23 DECEMBER

NEW ZEALAND GAZETTE

Under the Forward Commodity Purchase agreement, A has paid $2,000 to B on 1 January 1993, as full payment for the abovementioned deliveries. A funded this $2,000 through a Base Currency Loan from C, which is repayable in installments due on the abovementioned dates.

Under the Commodity Price Swap agreement, A agrees to pay a sum equal to the market value of the commodity on the abovementioned delivery dates (the Floating Price Swap). Another party agrees to pay A $1.00 per unit on the same dates and for the same quantities (the Fixed Price Swap).

Although payment obligations under the Commodity Price Swap agreement are fixed and incurred on the above dates, payment may not be made until 6 months later.

When A receives the commodity on the delivery date, it then on-sells. Again, payment for this on-sale may not be made until 6 months later.

For the relevant period, the following assumptions are made:

(a) the commodity price was increased at a uniform rate, being:

(b) the Base Currency $ rate to NZD has moved at a constant rate, being:

A shall have the following income/expenditure.

In respect of the Forward Commodity Purchase Agreement

At first balance date – 31 December 1993

a = $2,500

b = 750 × $1.40 = $1,050

c = 1000 × $1 + 750 × $1.20
= $1,000 + $900
= $1,900

d = $2,500

e = $750

f = 1,000 × $2,000 + 750 × $2,000
= $2,000 + $1,500
= $3,500

Income/expenditure is:

2,500 + 1,050 + 1,000 + 900 − 2,500
1.0    0.9    1.0   0.95  1.0
= 750 + 800 − 600
  0.9   1.0  0.95

Base Currency = $800
NZD = $849

At the second balance date – 31 December 1994

a = $750

b = 0

c = 500 × $1.40 + 250 × $1.60
= $700 + $400
= $1,100

d = 750 × $1.40
= $1,050

e = 0

f = 500 × $2,000 + 250 × $2,000
= $1,000 + $500
= $1,500

Income/expenditure is:

750 + 0 + 700 + 400 − 1,050 − 0
0.9   0.9  0.85  0.85
= 400 − 200
  0.9   0.85

Base Currency = ($200)
NZD = ($210)

In respect of the Base Currency Loan Agreement

At the first balance date – 31 December 1993

Base Currency = $200
NZD = $235

c = 1,500 × $2,000 + 750 × $2,000
2,500 2,500
= $800 + $600

f = $1,000 + $750

Income/expenditure is:

800 − 1,000 + 600 − 750
1.0   1.0   0.95  0.95

Base Currency = ($350)
NZD = ($358)

At the second balance date – 31 December 1994

c = 500 × $2,000 + 250 × $2,000
2,500 2,500
= $400 + $200

f = $500 + $250

Income/expenditure is:

400 − 500 + 200 − 250
0.9   0.9  0.85  0.85

Base Currency = ($150)
NZD = ($170)

In respect of the Floating Price Swap

Under subclause 6 (9) there is no income or expenditure in either income year.

In respect of the Swap

At the first balance date – 31 December 1993

a = $2,500

b = $750

c = $1,000 + $750
= $1,750

d = $2,500

e = 750 × $1.40
= $1,050

f = 1,000 × $1 + 750 × $1.20
= $1,000 + $900
= $1,900

Income/expenditure is:

2,500 + 750 + 1,000 + 750 − 2,500
1.0   0.9   1.0   0.95  1.0
= 1,050 − 900
  1.0   0.95

Base Currency = ($450)
NZD = ($491)

At the second balance date – 31 December 1994

a = 750 × $1.40
= $1,050

b = 0

c = $500 + $250
= $750

d = 0
e = 0

f = 500 × $1.40 + 250 × $1.60
= $700 + $400
= $1,100

Income/expenditure is:

1,050 + 0 + 500 + 250 − 750 − 0 − 700 − 400
0.9    0.9  0.85  0.85  0.9   0.9  0.85

Base Currency (BCD) = ($50)
NZD = ($65)

Adding all 3:

At the first balance date – 31 December 1993

NZD = $849 − $358 − $491 = $0
BCD = $800 − $350 − $450 = $0