1620 NEW ZEALAND GAZETTE, No. 68 10 JUNE 2004

commercially acceptable. In the case where the base currency is a commodity, the forward rate is the future value of the
commodity (in NZD)

future value in relation to a commodity and a future date means the value of the commodity at the future date, on a given
date, derived from any commercially-acceptable, market-based method of valuation

NZD means the currency of New Zealand

non-base currency means the currency under a forward contract that is not the base currency

spot contract means a contract for the sale or purchase of a currency for delivery in 2 business days

spot rate means the exchange rate for a spot contract as defined in Determination G6D: Foreign Currency Rates or in the
case of a commodity, the spot value (in NZD) of the commodity

spot value in relation to a commodity and a day means the value of the commodity on that day derived from any
commercially acceptable method of valuation

USD means the currency of the United States of America.

(3) All other terms used have the meaning given to them for the purpose of the Act.

6. Method—(1) Your gross income or expenditure in an income year from a forward contract under this determination is the
   total of:

(a) the expected component, calculated in accordance with subparagraphs (2) to (8); and

(b) the unexpected component, calculated in accordance with subparagraph (9).

(2) To calculate the income or expenditure in relation to a forward contract, you must first nominate a base currency.

(3) If the terms of the forward contract provide for the netting off or offsetting of any amounts payable to or by one party to the
forward contract with any amounts payable to or by the other party to the forward contract, you must ignore such netting off or
offsetting for the purpose of this determination.

(4) If the first income year for which you are required to apply this determination to a forward contract is the income year in
which you become a party to the forward contract, you must calculate the expected component for each income year of the
remaining term of the forward contract as at the time you become a party to the forward contract. The expected component is
calculated by first taking into account all base currency payments in relation to the forward contract. The base currency
payments of a forward contract consist of:

(a) the base currency value of the payment or receipt, if any, made in consideration of entering into the forward contract;

(b) the base currency value of the non-base currency payment to be made under the contract valued at the forward rate; and

(c) the base currency value of the non-base currency payment to be made under the contract valued at the contract rate.

(5) You must convert the base currency payments into NZD using forward rates as at the time you become a party to the
forward contract if the base currency is not NZD.

(6) The expected NZD net amount is the difference between items (b) and (c) in subparagraph (4), adjusted for any amount as
described in item (a). You must spread the expected NZD net amount using the yield to maturity method consistent with
Determination G3 and, where necessary, allocate it to the income year on the basis of Determination G1A. This will give the
expected component for each income year.

(7) You must use the straight-line method to spread the expected NZD net amount of a forward contract that has been written
for no consideration at a rate other than the forward rate.

(8) If the first income year for which you are required to apply this determination to a forward contract is after the income year
in which you entered the forward contract, and you have not been required to use Determination G14A for the forward
contract, you must follow the method set out in subparagraphs (1) to (7) to calculate gross income or expenditure of the
forward contract, except that:

(a) the NZD net amount to be spread under subparagraph (6) consists of:

(i) actual NZD payments that have occurred since you became a party to the forward contract until the end of the first
income year for which you must use this determination; and

(ii) expected NZD payments in the remaining term of the forward contract;

(b) the expected NZD payments in the remaining term of the forward contract must be calculated on the basis of the
forward rates available at the end of the first income year for which you must use this determination for the forward
contract.

(9) The unexpected component is the difference between the actual NZD value of the payments during the year and the
expected NZD value of those payments as calculated under subparagraph (5). You need not calculate the unexpected
component separately as it is part of the base price adjustment required under whichever is applicable of section EH 4 of the
Act and section EH 45 of the Act.

Transitional adjustment for existing forward contracts for foreign exchange and commodities

(10) You must perform a transitional adjustment calculation for the first income year for which you must use this
determination to calculate gross income or expenditure of any forward contract, if you entered the forward contract before
the income year and have not been required to use Determination G14A for the forward contract. You must perform the
transitional adjustment calculation for such forward contract in accordance with the following formula:

a – b – c + d

where:

a is the sum of all amounts that would have been income in respect of the forward contract from the time it was entered
until the end of the income year, if this determination had applied from the time you became a party to the forward
contract

b is the sum of all amounts that would have been expenditure in respect of the forward contract from the time it was
entered until the end of the income year, if this determination had applied from the time you became a party to the
forward contract