16 SEPTEMBER
NEW ZEALAND GAZETTE
2753

livestock are pigs, the number of livestock, other than male breeding sires, of the type of the taxpayer, being livestock of the taxpayer on hand at the end of the immediately preceding income year which were at the time mature livestock or during the income year maturing livestock of the taxpayer,—

which are disposed of by the taxpayer or die (while owned by the taxpayer) during the income year;

c is the average cost or value of mature livestock of the taxpayer on hand at the end of the immediately preceding income year valued under a valuation method other than the herd scheme;

d is the average cost of livestock intake of the taxpayer as calculated under paragraph 4, 6 or 7 of this determination;

e is the number of mature livestock of the taxpayer on hand at the end of the income year valued under the national standard cost scheme.

The average closing cost calculated according to the formula is applied to all of livestock of the mature inventory group which are to be valued using the average cost system under the provisions of section 86c of the Act at the end of the income year.

Where the herd scheme is to be used in relation to a type of livestock and no livestock of that type were valued using the herd scheme in the immediately preceding income year then the rules associated with paragraphs 18, 19 (and paragraph 30 in the case of the 1992–93 income year) of this determination must be applied before calculating the average closing cost in accordance with this paragraph.

15. Change in cost flow identification system when using the national standard cost scheme

Subject to the rules contained in this paragraph and in the following paragraphs of this determination, a taxpayer may change the cost flow identification system used when valuing the taxpayer’s mature inventory grouping under the national standard cost scheme from FIFO to average cost or vice versa.

Where a taxpayer changes to the average cost system, for the purposes of determining the average cost in the year of change, the average cost of mature livestock of the type in question on hand at the end of the immediately preceding income year will be calculated as follows:

a
—
b

where:

a is the total closing cost of that inventory grouping valued under national standard cost in the preceding income year; and

b is the total closing number of livestock in that inventory grouping valued under national standard cost in the preceding income year.

If the FIFO inventory system is being adopted, the opening inventory cost in the year of the change will be the total closing cost of that inventory grouping in the immediately preceding income year.

16. Reduction in livestock numbers where stock valued under national standard cost scheme and the herd scheme

Where a taxpayer in any income year values any livestock under the herd scheme and also values other livestock of the same type under the national standard cost scheme, any reduction in the number of livestock of that type below the number on hand at the end of the immediately preceding income year must first be accounted for from the relevant class (in any case where the taxpayer adopts a class by class separation of livestock numbers) or inventory grouping valued at the end of the immediately preceding income year under the national standard cost scheme. Accordingly, any reduction in the number of livestock of that type shall only commence to reduce the number of livestock valued under the herd scheme:

(a) In any case where the taxpayer uses an inventory system which separates out livestock of that class, where no livestock of that class is on hand at the end of the income year to be valued under the national standard cost scheme; or

(b) In any case where the taxpayer uses an inventory system which does not separately identify livestock of that class, where no livestock of the relevant inventory grouping is on hand at the end of the income year to be valued under the national standard cost scheme.

17. Treatment of livestock bailed by a taxpayer which may be valued under the national standard cost scheme

Under section 86c (3) of the Act, taxpayers who bail livestock are only eligible to use the national standard cost scheme in relation to bailed livestock where the taxpayer expects to have the livestock originally bailed to be re-delivered. In such a case, the provisions of this determination shall apply as if the bailed livestock were livestock on hand.

Movement Between National Standard Cost and Other Livestock Valuation Schemes

18. Changing from herd scheme, market value option or replacement price option to national standard cost scheme

In respect of each livestock type, in the income year in which the national standard cost scheme is first adopted by the taxpayer, the opening inventory structure and cost must be calculated, in accordance with the appropriate paragraph 19 or 20 of this determination, in order to allow calculation of the closing inventory number and cost in respect of that type of livestock in that income year under the provisions of paragraphs 12 to 14 of this determination.

19. Where the taxpayer adopts the average cost system of cost flow identification

If a taxpayer is to use the average cost system in respect of livestock valued under the national standard cost scheme, in respect of each relevant inventory grouping of livestock, the average cost at the beginning of the income year will be deemed to be equal to the amount calculated in accordance with the following formula: a b

where—

a is the aggregate value adopted for income tax purposes in the preceding income year by the taxpayer in respect of all classes of livestock of the taxpayer of the type which would have been included in the inventory grouping on hand at the end of the immediately preceding income year;

b is the number of livestock of the taxpayer of the type which would have been included in the inventory grouping on hand at the end of the immediately preceding income year.

20. Where the taxpayer adopts the FIFO system of cost flow identification

If a taxpayer is to use the FIFO system to account for livestock under the national standard cost scheme, the value of the opening inventory of mature livestock of the taxpayer in the relevant income year will be equal to the values for income tax purposes of each class of livestock of the taxpayer in an inventory grouping of the type in question on hand at the end of the immediately preceding income year. For the purposes of application of the FIFO system in the income year of the change and subsequent income years, the opening inventory of mature livestock