Section EB 22 — Income Tax Act 2007: Valuing closing stock consistently for low-turnover traders

EB 22 Valuing closing stock consistently for low-turnover traders Traders complying with generally accepted accounting practice (1) In determining the value of closing stock at cost, discounted selling price, or replacement price, a low-turnover trader who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 or an equivalent standard issued in its place. Other traders (2) A low-turnover trader who does not comply with generally accepted accounting practice must be consistent from 1 income year to the next in— (a) their choice of valuing closing stock at cost, discounted selling price, or replacement price; and (b) their use of market selling value, if it is greater than cost; and (c) their use of a cost-flow method of allocating costs under section EB 7(1) to (5) ; and (d) the extent to which they include indirect costs in the cost of trading stock that they manufacture or produce; and (e) their method of calculating discounted selling price. When changes allowed (3) A low-turnover trader to whom subsection (2) applies may make changes in relation to the matters described in the subsection if— (a) the change is justified by sound commercial reasons and for this purpose, the advancement, deferral, or reduction of an income tax liability is not a sound commercial reason; or (b) the change is required by another provision in this subpart. Records (4) A low-turnover trader who makes a change as described in subsection (3) must keep sufficient details of the change, and the reasons for the change, under section 22 of the Tax Administration Act 1994. Defined in this Act: closing stock , cost , generally accepted accounting practice , income tax liability , income year , low-turnover trader , NZIAS 8 , , trading stock Compare: 2004 No 35 s EB 22 Section EB 22(1): amended, on 1 April 2008, by section 353(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EB 22 list of defined terms NZIAS 8 : inserted, on 1 April 2008, by section 353(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).