10 JUNE 2004

NEW ZEALAND GAZETTE, No. 68

1605

How do I elect to use the method outlined in this determination?

Election for 2003-04 and subsequent income years

If you are not a member of a group of companies, you may elect to use this determination for the 2003-04 and subsequent income years by giving a notice of election to the Commissioner on or before the day that is the earlier of 31 July 2004 and the day that is the end of your accounting period for the 2003-04 income year. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

If you are a member of a group of companies, you may elect to use this determination for the 2003-04 and subsequent income years by giving, together with all other members of the group, a notice of election to the Commissioner on or before the day that is the earlier of 31 July 2004 and the earliest day that is the end of an accounting period for the 2003-04 income year for a member of the group. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

Election for 2004-05 and subsequent income years

If you are not a member of a group of companies, you may elect to use this determination for the 2004-05 and subsequent income years by giving a notice of election to the Commissioner on or before the day that is the later of 31 July 2004 and the 63rd day of your accounting period for the 2004-05 income year. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

If you are a member of a group of companies, you may elect to use this determination for the 2004-05 and subsequent income years by giving, together with all other members of the group, a notice of election to the Commissioner on or before the day that is the later of 31 July 2004 and the earliest day that is the 63rd day of an accounting period for the 2004-05 income year for a member of the group. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

Election for income years beginning after 2004-05 income year

If you are not a member of a group of companies, you may elect to use this determination for an income year beginning after the 2004-05 income year, and for subsequent income years, by giving a notice of election to the Commissioner on or before the day that is the 63rd day of your accounting period for the income year. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

If you are a member of a group of companies, you may elect to use this determination for an income year beginning after the 2004-05 income year, and for subsequent income years, by giving, together with all other members of the group, a notice of election to the Commissioner on or before the earliest day that is the 63rd day of an accounting period for the income year for a member of the group. The notice must be in writing and elect:

● to use this determination; and
● to use Determination G14B: Forward contracts for foreign exchange and commodities: an expected value approach.

How do I calculate the transitional adjustment?

A transitional adjustment must be made for the first income year for which you are required to use this determination for a forward contract if you entered the forward contract before the income year and you have not been required to apply Determination G9B for the forward contract. The calculation is comparable to Determination G25: Variations in the Terms of a Financial Arrangement.

The transitional adjustment requires that for the income year of the adjustment you treat as gross income or expenditure the difference between the total amount that would have been gross income or expenditure calculated as described in this determination and the total amount actually recognised over the previous income years.

How is income or expenditure calculated in the year the financial arrangement matures or is disposed of?

Regardless of which method you choose to use, you must calculate income or expenditure using the base price adjustment in whichever of section EH 4 and section EH 47 of the Act is applicable to the financial arrangement.

Miscellaneous issues

This determination requires that where a financial arrangement involves or is expressed in more than one currency or commodity, each separate currency or commodity tranche is to be treated as a separate financial arrangement.

Where a facility provides for the rollover of a financial arrangement, the financial arrangement matures when the rollover occurs. Section EH 4 or section EH 47 of the Act applies in the income year the rollover occurs. Any payment arising from the rollover of a financial arrangement will be taken into account under section EH 4 or section EH 47 of the Act unless the payment is related to a separate financial arrangement.

2. Reference—This determination is made pursuant to section 90 (1) (c) and 90AC (1) (d) of the Tax Administration Act 1994.

3. Scope—(1) This determination applies to the calculation of gross income or expenditure from a financial arrangement, to the extent that any right or obligation under the financial arrangement is fixed or otherwise determined in a currency other than NZD and is not fixed in NZD. The payment dates under the financial arrangement must be known not later than your first balance date after you become a party to the financial arrangement.

(2) This determination does not apply to:

(a) a futures contract;
(b) a security arrangement;