27 SEPTEMBER NEW ZEALAND GAZETTE 3229

(4) This determination provides for the determination of the discounted value of the amounts payable for the property under a foreign currency ASAP. The discounted value must be calculated:

(a) in the base currency as if it were New Zealand $;

(b) using an interest rate appropriate to the currency, the rate being a rate ascertained using a method consistent with Determination G13A, Prices or Yields, that is the foreign interbank offer rate appropriate to the term of the foreign currency ASAP;

(c) by then converting that amount to NZ$ using an appropriate rate as set out in paragraph (5) of Method.

(5) You will have to spread any income or expenditure arising from the ASAP using the method in Determination G29 which is applicable to the rate you have used.

5. Interpretation—In this determination:

(1) A reference to the ‘Act’ is a reference to the Income Tax Act 1994;

(2) ‘Acceptable present value calculation method’ means calculation Method A in Determination G10B: Present Value Calculation Methods, or an alternative method producing not materially different results;

‘ASAP’ means an agreement for sale and purchase of property which is subject to the accrual rules;

‘Foreign currency ASAP’ means an ASAP under which the price for the property the subject of the ASAP is denominated in a foreign currency;

‘Forward rate’ means the rate for a forward contract as defined in paragraph 6(4) of Determination G6D: Foreign Currency Rates;

‘Interbank offer rate’ in relation to a term means the rate at which a bank makes funds available to another bank which is a highly reliable credit risk and a trader in the market for such funds and for such a term; and includes, according to the circumstance, the rates collectively referred to as “LIBOR” and “SIBOR”;

‘Lowest price’ is the lowest price referred to in paragraph (c) of the definition of core acquisition price;

‘Price’ means the Foreign Currency price agreed to be paid in consideration for the property under an ASAP, including any agreed interest charges;

‘Rights date’ is the day on which the first Right in the specified property subject to an ASAP is to be transferred;

‘Specified property’ means property that is acquired or sold pursuant to a deferred property settlement;

‘Spot rate’ means the exchange rate for a spot contract as defined in Determination G6D: Foreign Currency Rates;

(3) all other terms used have the same meaning given to them for the purposes of the qualified accruals rules in the Act.

As an aid to interpretation only, and not as a definitive list, the following are the terms defined in the Act that are of particular note: right in the specified property, agreement for the sale and purchase of property.

6. Method—(1) For the purposes of paragraph (ii) of the definition of ‘w’ in the definition of the core acquisition price in section OB 1, you must calculate the discounted value of the foreign currency amounts payable for the property subject to a foreign currency ASAP to which this determination applies by summing—

(a) Every amount payable to or, as the case may be, by you for the property on or before the rights date expressed in the foreign currency; and

(b) The amount of foreign currency equal in value to the present value as at the rights date of amounts payable to or, as the case may be, by the person for the property after the rights date.

(2) For the purposes of this determination, the present value as at rights date of amounts payable shall be calculated by applying an acceptable present value calculation method to the interest rate determined under subclause (3).

(3) The annual rate of interest at which the present value of the amounts payable is required to be calculated shall be: the interbank offer rate for the currency and the term of the foreign currency ASAP at rights date, being a Market yield determined in a manner consistent with Determination G13A: Prices or Yields. For this purpose the spot rate and the forward rate are to be determined in accordance with Determination G6D: Foreign Currency Rates.

(4) The present value of the amounts payable together with any deposit or other amounts paid on or before the rights date is the amount “w” to be used to calculate the core acquisition price.

(5) This amount is then converted to NZ$ using one of the following rates as appropriate:

(a) the rate, on the contract date, available to the taxpayer from a New Zealand registered bank for the exchange of NZ$ for that foreign currency on the rights date (Rate A); or

(b) the rate, on the contract date, available to the taxpayer from a New Zealand registered bank for the exchange of NZ$ for that foreign currency on the settlement date (Rate B); or

(c) Spot rate on the rights date (Rate C)

(d) Spot rate on the contract date (Rate D)

(e) Spot rate on payment (Rate E).

(6) The core acquisition price shall be used to determine the acquisition price of a foreign currency ASAP in accordance with section OB 1.

(7) In a year before the year in which you are required to do a base price adjustment for the foreign currency ASAP, calculate your income or expenditure by applying the Method in Determination G29 which corresponds with the rate you use to determine the NZ$ value of the core acquisition price.

7. Example—(1) A commercial property is sold for US$1,400,000 under a sale and purchase agreement subject to certain repairs being made to the building. An initial deposit of $140,000 is made on 1 February 1989. On 1 March 1989 repairs on the building are complete and the sale becomes unconditional. The balance of US$1,260,000 is due six months after the date possession passes. Possession of the property passes on 15 March 1989. Therefore the term of the arrangement is 15 March 1989 to 15 September 1989 - 184 days.

The purchaser’s balance date is 31 March.

The USD/NZD exchange rates for the various dates are—

1 February 1989 0.5600
15 March 1989 0.5800
31 March 1989 0.5750
15 September 1989 0.5700

In this case the purchaser is the “issuer” for the purposes of the accruals legislation.

(2) The US interbank offer rate on 15 March 1989 for a period of six months is 8.0 percent ascertained using a method consistent with Determination G13A: Prices or Yields.

(3) Method A of Determination G10B: Present Value Calculation Methods, is applied to calculate the present