27 SEPTEMBER NEW ZEALAND GAZETTE

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the price and lowest price, calculated in accordance with paragraph (6).

(5) If the result of the calculation in paragraph (4) is positive, that amount will be income if you are the seller of the property and expenditure if you are the buyer. If the result is negative, the amount will be income if you are the buyer of the property and expenditure if you are the seller.

(6)‘c’ in paragraph (4) is calculated as follows:

Apply an available method under the accrual rules to calculate the foreign currency income or expenditure you would have if you were a party to a foreign currency loan or loans as set out above in ‘Rate and Method—General’. In calculating this expenditure, treat the foreign currency loan or loans as if they were in NZ$. In particular, do not apply Determination G9A to the loan contract;

Convert this foreign currency income or expenditure into NZ$ using the exchange rate used to calculate ‘a’ in paragraph (4).

12. Example—(1) A US resident agrees to sell a quantity of plate glass to a New Zealand resident glass wholesaler for US$140,000. The parties agree that the price will be paid six months after the glass is landed in Auckland, and will remain the seller’s risk until it is landed. The parties also agree that if the price were paid at the time the glass is landed, the price would be US$130,000.

(2) The New Zealand resident wholesaler must calculate the ‘lowest price’ by converting the US$130,000 to NZ$ using one of the rates set out in section OB 7(1) of the Act, or in this determination. The difference between that amount in NZ$, and US$140,000 at the spot rate on payment date, will be income or expenditure to the New Zealand resident. It must then apply the appropriate method to spread that income or expenditure over the life of the ASAP.

Determination signed the 16th day of September 1996.

ROBIN OLIVER, General Manager, Policy Advice Division.

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Summary flowchart - calculating accrual income from foreign currency agreements for sale and purchase

This chart is included for illustration purposes only. It does not form part of the determination.

Are you a party to a foreign currency ASAP? (see definition in para 5)

NO → Do not apply determination

YES ↓

Is the foreign currency ASAP an excepted financial arrangement? (see explanation in para 1(1))

YES → Do not apply determination

NO ↓

Did you enter into the foreign currency ASAP after your 1995-96 income year? (see para 3(1))

NO ↓

Calculate the ‘lowest price’ using Rate A or B. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6, 7 and 8)

↓

Is your annual gross income less than $2.5m? (see para 3(5))

NO ↓

Calculate the ‘lowest price’ using Rate A, B or E. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6, 7, 8 and 11)

YES ↓

Calculate the ‘lowest price’ using Rate A, B or E. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6, 7, 8 and 11)

↓

Do you wish to use section OB 7 to calculate ‘lowest price’ of the property under sec. EZ 10 (2)? (see para 3(1))

YES ↓

Calculate the ‘lowest price’ using Rate A, B, C, D or E. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6 to 11)

NO ↓

Is the property trading stock, other than land or shares? (see para 3(4))

YES ↓

Is your annual gross income less than $2.5m? (see para 3(5))

YES ↓

Calculate the ‘lowest price’ using Rate A, B or E. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6, 7, 8 and 11)

NO ↓

Calculate the ‘lowest price’ using Rate A, B, C or D. Calculate your income under section EH 1 from the foreign currency ASAP using the corresponding method. (see paras 6 to 10)