10 JUNE 2004

NEW ZEALAND GAZETTE, No. 68

1619

(iii) on or before the earliest day that is the 63rd day of your accounting period that corresponds to the income year, if
the election is to apply for an income year that is after the 2004-05 and for subsequent income years; and

(d) if you are a member of a group of companies, be made by all the members of the group; and

(i) 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
that corresponds to the 2003-04 income year for a member of the group, if the election is to apply for the 2003-04
and subsequent income years;

(ii) 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 that corresponds to the 2004-05 income year for a member of the group, if the election is to apply for the
2004-05 and subsequent income years;

(iii) on or before the earliest day that is the 63rd day of an accounting period that corresponds to the income year for a
member of the group, if the election is to apply for an income year that is after the 2004-05 income year and for
subsequent income years.

(5) If you must use this determination, you may not use:

(a) Determination G14: Forward Contracts for Foreign Exchange and Commodities to calculate gross income or
expenditure of any forward contract that is within subparagraphs (1) and (2) above;

(b) Determination G9A: Financial Arrangements that are Denominated in a Currency or Commodity other than
New Zealand Dollars to calculate gross income or expenditure of any financial arrangement that is within the scope
of Determination G9C: Financial arrangements that are denominated in a currency other than New Zealand dollars: an
expected value approach.

(Note: A determination to which Determination G14B refers may be changed or rescinded by a new determination made by the
Commissioner. In such a case, a reference to the old determination is extended to the new determination.)

4. Principle—(1) If you are a party to a forward contract to which this determination applies, the gross income or expenditure
   in respect of the forward contract is calculated by taking into account all amounts arising from the fluctuations of exchange
   rates or commodity prices.

(2) The gross income or expenditure from the forward contract is the total of an expected component and the unexpected
component.

(3) If you must apply this determination to a forward contract for the income year in which you enter the forward contract, you
must measure the expected component as at the time you enter the forward contract.

(4) To measure the expected component, you must convert the base currency payments into expected NZD payments on the
basis of forward rates as at the time you become a party to the forward contract and spread the expected NZD net amount over
the term of the contract.

(5) If you must apply this determination for the first time to a forward contract for an income year that is after the income year
in which you enter the forward contract, and you have not applied Determination G14A for the forward contract, you must
measure the expected component as at the end of the income year. You must follow the principle set out above by calculating
the expected NZD net amount using actual NZD payments up to the end of the income year in which you first apply the
determination and the forward rates as at the end of that income year.

(6) You must recognise the unexpected component for a forward contract by performing the base price adjustment that is
required under whichever is applicable of section EH 4 of the Act and section EH 45 of the Act.

Transitional adjustment

(7) For the first income year for which you must use this determination, you must perform the transitional adjustment
calculation to calculate gross income or expenditure for all forward contracts:

(a) that you entered before the income year; and

(b) for which you have not been required to use Determination G14A.

(8) This adjustment ensures that the gross income or expenditure up to the end of the income year in which you first use this
determination is equal to that which would have been returned if the actual NZD payments and the forward rates, as described
in subparagraph (4), were known and this determination had been used since you became a party to the forward contract.

5. Interpretation—(1) In this determination, a reference to the Act is a reference to the Income Tax Act 1994.

(2) In this determination:

base currency in relation to a person and a forward contract, means the currency under the forward contract which is
adopted by the person as a reference currency for the purposes of this determination

commencement date of a forward contract means the date on which the contract was entered into, or the date on which it
was acquired, if later

contract rate in relation to a forward contract means the price of one currency expressed in terms of the other currency
under the forward contract

covered interest parity means the proposition that the differential between forward and spot exchange rates is equal to the
interest differentials. That is, the forward rate for a foreign currency exchange at time t for 1 period ahead is equivalent
to the spot rate at time t, St, multiplied by 1 plus the foreign interest rate, if, divided by 1 plus the domestic interest rate,
id. Forward rates at time t for n periods, Fwdt,n, can thus be derived based on the principle of covered interest parity as:

(1 + if)n
Fwdt,n = St ×
(1 + id)n

currency includes any commodity used as a medium of exchange or account, whether in general use or for the purpose of
an arrangement

exchange rate means the price of 1 currency expressed in another currency

forward rate means the exchange rate for a forward contract as defined in Determination G6D: Foreign Currency Rates
or the forward exchange rate calculated using the principle of covered interest parity or other methods that are