16 SEPTEMBER NEW ZEALAND GAZETTE

where—

a is the number of growing pigs which at any time during the income year were aged between 10 and 17 weeks of age and which were sold during the income year or are on hand at the end of that income year;

b is the number of weaned pigs purchased by the taxpayer during the income year for the purposes of rearing to about 17 weeks of age or older;

c is the number of pigs on hand at the beginning of the income year which were valued as growing pigs 10 to 17 weeks of age;

d is national standard cost for the income year for pigs in the weaners to 10 weeks of age category of livestock;

e is the national standard cost for the income year for pigs in the growing pigs 10 to 17 weeks of age category of livestock;

f is the aggregate purchase cost of pigs purchased at the age of weaning or older during the income year by the taxpayer;

g is the total number of pigs purchased by the taxpayer at the age of weaning or older during the income year.

Provisions Which Apply to Paragraphs 3 to 7 of this Determination

8. Treatment of high-priced livestock transferred from high-priced livestock scheme to national standard cost scheme

Where any high-priced livestock is required under section 86I of the Act to be valued under the national standard cost scheme, that livestock shall be treated under this determination as livestock purchased at the national average market value for the income year in which the livestock is no longer taken into account under section 86I of this Act.

9. Exclusion of certain livestock from livestock cost calculations

Exclusion of breeding sires where the herd scheme is being used in conjunction with national standard cost

Where the herd scheme has been adopted for a particular livestock type and the taxpayer is using that scheme to value any livestock of that type, the purchase cost of breeding sires of that livestock type and the number purchased during the income year must be excluded from the calculation of average cost of the taxpayer’s livestock of the type under the national standard cost scheme. In any case where a taxpayer commences to use the herd scheme in conjunction with the national standard cost scheme, no adjustment to the calculation of average costs under the national standard cost scheme shall be made in respect of breeding sires purchased in earlier income years.

Exclusion of high-priced livestock

Any livestock purchased which must be valued under the provisions of section 86I of the Act as high-priced livestock at the end of the income year must be excluded from the calculation of average cost under the national standard cost scheme with regard to both the number and cost of livestock purchased.

9A. Establishment of NSC Where Calculation of NSC Using Any of Paragraphs 3 to 7 Produces Nil Values

In the event of any of the formulas in paragraphs (3) to (7) of this determination producing an average value at the end of an income year of nil, the average value shall be deemed to be, in the case of:

• rising one year class of livestock, the national standard cost for rising one year livestock of that type for that income year; and

• rising two year and older intake of livestock other than rising three year male non-breeding cattle, the national standard cost for rising one year livestock of that type plus the national standard cost for rising two year livestock of that type for that income year; and

• rising three year male non-breeding cattle, the national standard cost for rising one year male non-breeding cattle plus an amount equal to twice the national standard cost for rising two year male non-breeding cattle for that income year.

Inventory System Requirements Under the National Standard Cost Scheme

10. General

In respect of sheep, cattle, deer and goats, as this livestock ages until it becomes mature livestock, the costs of production of the livestock accumulate and are incorporated into average values over balance dates. Once the livestock has first become mature livestock of the taxpayer at the end of an income year, the value of the livestock to the taxpayer under the national standard cost scheme becomes fixed (not accumulating any further production costs) and remains in the taxpayer’s inventory valuation for the mature inventory grouping until such time as the livestock is sold, transferred to another livestock valuation option or dies (each as determined having regard to any sub-inventory grouping adopted by the taxpayer and to the cost flow identification system applied by the taxpayer, as each is detailed further below).

In respect of pigs, the average cost identified with respect to the pigs entering inventory in any particular income year and remaining on hand at the end of the income year remains fixed (not accumulating any further production costs) and remains in the taxpayer’s inventory valuation for the mature inventory grouping until such time as the pigs are sold, transferred to another livestock valuation option or die (as each is determined having regard to any sub-inventory grouping adopted by the taxpayer and to the cost flow identification system applied by the taxpayer, as each is detailed further below).

For the purposes of identifying the end of year valuation of mature livestock under the national standard cost scheme, a taxpayer must have a cost flow identification system involving specific identification, average costing or first-in first-out (FIFO) costing, as detailed further in paragraphs 12 to 14 of this determination.

The average cost inventory system or the first in first out inventory system represent the minimum standard of inventory accounting for all types of livestock. The taxpayer may choose to use more accurate inventory accounting systems.

Different systems may be adopted by the same taxpayer for different types of livestock.

Where a mature inventory grouping of a type of livestock is broken down by a taxpayer into sub-inventory groups (as detailed further below), each sub-inventory group of that type of livestock must be valued by the taxpayer under the national standard cost scheme using the same cost flow identification system.

Where a taxpayer is using the national standard cost scheme to value any livestock of a type within an inventory grouping, or as the case may be, sub-inventory group, the taxpayer shall value all livestock of that inventory grouping or sub-inventory group under the national standard cost scheme, except for:

• livestock of that type valued under the herd scheme at the end of the relevant income year; or

• Bailees who elect to account for deficiencies of bailed livestock at market value or replacement price.