19 JANUARY NEW ZEALAND GAZETTE 145

payable (such as monthly and quarterly payment intervals, or payments in arrears and in advance):

"Interest Rate and Currency Swap" means any swap under which the parties agree to exchange fixed rate or floating rate interest payments in one currency for fixed or floating rate interest payments in another currency, calculated with reference to a specified actual or notional amount of principal;

"Interest Rate Swap" means any swap under which the parties agree to exchange fixed rate interest payments for floating rate interest, in the same currency, calculated with reference to a specified actual or notional amount of principal;

"Interest Swap" means any swap under which the parties agree to exchange interest payments where the payment streams differ with respect to the basis upon which interest amounts are payable (such as monthly and quarterly payment intervals, or payments in arrears and in advance);

"Mark to market method" means a method that reflects the revaluation of the swap at its current market value. That market value must be computed by reference to one or more rates or yields, published electronically by Reuters New Zealand Limited or Telerate New Zealand Limited on the relevant date, that are relevant (as regards quality, term and currency) to the particular swap or the relevant side of it;

"Maturity Date" means the date upon which, according to its terms, the swap terminates (being the last day of the period in respect of which calculations under the swap are to be applied);

"Principal Amount" means, in relation to one side of a swap, the actual or notional principal that is specified in the swap contract in relation to that side of the swap or, where no such principal is specified, the notional principal implicit in the computation of the cashflows payable by the parties in relation to that side of the swap;

"Principal Exchange" means the payment by one party of the Principal Amount relating to one side of the swap on the same date as there is a payment by the other party of the Principal Amount relating to the other side of the swap, and includes the situation where such payments are offset in accordance with the terms of the swap and any balancing amount is paid;

"Reuters New Zealand Limited" means Reuters New Zealand Limited or any company that is associated with Reuters New Zealand Limited and is in the business of providing financial information in the form of multicontributor screens or contributor screens;

"Telerate New Zealand Limited" means Telerate New Zealand Limited or any company that is associated with Telerate New Zealand Limited and is in the business of providing financial information in the form of multicontributor screens or contributor screens;

"The Act" means the Income Tax Act 1976.

(2) For the purposes of this Determination each side of the swap must be identified:

(a) Where the swap is an Interest Rate Swap

(i) the rights and obligations of the parties to the swap that relate to the payment and computation of amounts calculated by reference to the fixed rate of interest constitute one “side of the swap”; and

(ii) the rights and obligations of the parties to the swap that relate to the other basis of payment of interest constitute the other “side of the swap”.

(b) Where the swap is an Interest Swap

(i) the rights and obligations of the parties to the swap that relate to one basis of payment of interest constitute one “side of the swap”; and

(ii) the rights and obligations of the parties to the swap that relate to the other basis of payment of interest constitute the other “side of the swap”.

(c) Where the swap is a Currency Swap, an Interest Rate and Currency Swap or an Interest and Currency Swap

(i) the rights and obligations of the parties to the swap that relate to the payment and computation of amounts expressed in one currency constitute one “side of the swap”; and

(ii) the rights and obligations of the parties to the swap that relate to the payment and computation of amounts expressed in the other currency constitute the other “side of the swap”.

(3) A determination to which this Determination refers may be varied, rescinded, restricted or extended by a new determination made by the Commissioner. In such a case, the reference to the old determination is taken to be extended to the new determination.

6. Method

(1) If you may adopt a method that has regard to market valuation to calculate income and expenditure in respect of a swap pursuant to section 64C (4) of the Act, and you choose to do so, you must use a mark to market method. That method must also satisfy the requirements of section 64C (4) of the Act.

For these purposes, this Determination approves the use of any rates or yields quoted with respect to markets that have been approved by the Commissioner by determination, and approves the use of any sources of information that have been approved by the Commissioner by determination.

If you have adopted such a method for calculating the income or expenditure in respect of a swap in one income year, you must, so far as is possible, apply that method consistently, and having regard to the same published rates and yields, for subsequent income years over the term of the swap, unless the Commissioner otherwise allows.

(2) If you are a party to a swap that involves a spot exchange at the current spot rate and a future exchange of fixed amounts at a single fixed date, and you do not use a mark to market method under section 64C (4), you must use the method specified in Determination G14: Forward Contracts For Foreign Exchange And Commodities.

(3) If you are a party to a swap to which Determination G14 does not apply, and you do not adopt a method under section 64C (4), you must (unless the proviso to paragraph (a) of section 64C (3) of the Act applies) calculate income deemed to be derived or expenditure deemed to be incurred by you as if each side of the swap comprised a separate, simultaneous and mutual loan between the parties to the swap. Each of the loans is to be characterised and treated according to the principles outlined in sub-clauses 6 (4) to (7) below.

(4) If the terms of the swap provide for the netting off or offsetting of any amounts payable to or by one party to the swap with any amounts payable to or by the other party to the swap, ignore such netting off or offsetting for the purposes of sub-clauses 6 (3), (5), (6) and (7) of this Determination.

(5) Subject to sub-clause 6 (4) above, treat the deemed loans referred to in sub-clause 6 (3) above relating to each side of the swap as comprising the following cashflows:

(a) Where the terms of the swap provide for both the payment of the Principal Amount by the Deemed Lender to the Deemed Borrower on the Effective Date, and the