New Zealand Gazette – 2004 – No. 68

Page 1610

✨ Financial Arrangements



NEW ZEALAND GAZETTE, No. 68

10 JUNE 2004

Expected Cash (NZD) Actual Cash (NZD) Unexpected Income/Expenditure
1-Sep-08 733,995 813,008 79,013
1-Mar-09 727,004 813,008 86,004
1-Sep-09 15,121,690 17,073,171 1,951,480
8,768,389 2,170,119

At the first balance date – 30 June 2005

There are two components to the income or expenditure for the financial arrangement in this income year: the gains expected at the contract date and the unexpected losses. The expected gains as summarised above are allocated to the income year in a way consistent with Determination G1A. Therefore, the gross income or expenditure for the year ended 30 June 2005 is:

(($848,432) + (121/184 \times $852,533) - $10,253 = $1,398,812)

where NZD $1,398,812 is gross income of the NZ investor.

At the second balance date – 30 June 2006

The gross income or expenditure at 30 June 2006 is calculated as:

((63/184 \times $852,533) + ($857,381) + (121/184 \times $863,020) - $8,141 - $6,609 = $1,702,060)

where NZD $1,702,060 is gross income of the NZ investor.

At the third balance date – 30 June 2007

The gross income or expenditure at 30 June 2007 is calculated as:

((63/184 \times $863,020) + ($869,494) + (121/184 \times $876,855) - $1,600 + $4,506 = $1,744,518)

where NZD $1,744,518 is gross income of the NZ investor.

On 30 September 2007 the bond is sold for USD $10,000,000 (i.e. an approximate yield of 16% pa). At this date the USD/NZD spot rate was 0.6320. At this date the investor is subject to the base price adjustment under section EH 47:

consideration – income + expenditure + amount remitted

where:

consideration is the consideration paid or payable to the company less the consideration paid or payable by the company

(= 500,000/.6455 + 500,000/.6500 + 500,000/.6550 + 500,000/.6570 + 500,000/.6580 + 500,000/.6400 + 10,000,000/.6320 - 8,300,000/.6310)

(= $20,432,131 - $13,153,724)

= NZD $7,278,407

income is all the amounts of gross income derived in previous income years

(= 1,398,812 + 1,702,060 + 1,744,518 ) (as calculated above) (= $4,845,390 ) NZD

expenditure is expenditure incurred in previous income years

= 0

amount remitted is the amount of consideration remitted

= 0.

So the base price adjustment is:

consideration – income + expenditure + amount remitted

(= 7,278,407 - 4,845,390 + 0 + 0)

= NZD $2,433,017.

Since this is a positive amount, it is gross income of the NZ investor in this income year.

Example B: Discounted bond entered into before the 2003-04 income year

A NZ investor holds a United States Treasury Bond on its balance date of 30 June 2004. The bond has a term of 5 years and bears 10% interest payable semi-annually on 1 September and 1 March. It has a face value of USD $10,000,000. The bond was purchased at issue for USD $8,300,000 and matures on 1 September 2007.

This is effectively the same as Example A except that the discounted bond was acquired on 1 September 2002. The following table presents the spot rates at the relevant dates and the forward rates at the time of contract out to the relevant dates as in Example A.

Date Spot Fwd (0,t) US,I NZ,I
1-Sep-02 0.6310 0.6310 0.05 0.04
1-Mar-03 0.6455 0.6371 0.05 0.04
1-Sep-03 0.6500 0.6432 0.05 0.04
1-Mar-04 0.6550 0.6494 0.05 0.04
1-Sep-04 0.6570 0.6556 0.05 0.04
1-Mar-05 0.6580 0.6619 0.05 0.04
1-Sep-05 0.6400 0.6683 0.05 0.04
1-Mar-06 0.6380 0.6747 0.05 0.04
1-Sep-06 0.6150 0.6812 0.05 0.04
1-Mar-07 0.6150 0.6878 0.05 0.04
1-Sep-07 0.6150 0.6944 0.05 0.04


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Online Sources for this page:

VUW Te Waharoa — PDF NZ Gazette 2004, No 68


Gazette.govt.nz — PDF NZ Gazette 2004, No 68




✨ LLM interpretation of page content

💰 Further examples of financial arrangements denominated in foreign currency (continued from previous page)

💰 Finance & Revenue
Financial Arrangements, Foreign Currency, Discounted Bond, Spot Rates, Forward Rates, Expected Income, Unexpected Income