Section EW 15G — Income Tax Act 2007: Modified fair value method

EW 15G Modified fair value method When this section applies (1) This section applies when— (a) a person has entered into a financial arrangement in the ordinary course of their business and the person is not in the business of dealing in relation to the financial arrangement; and (b) the financial arrangement is denominated in a currency other than New Zealand dollars or is a derivative instrument; and (c) the financial arrangement–– (i) is not treated under IFRSs by the person as a hedge; or (ii) is treated under IFRSs by the person as a hedge of other financial arrangements, for each of which the person does not use the fair value method; or (iii) is treated under IFRSs by the person as a hedge of something that is not a financial arrangement; and (d) the person and all companies in a group of companies to which the person belongs have chosen to use the modified fair value method and have notified the Commissioner at the time of filing a return of income. Exception for some group members and financial arrangements (1B) A person who is a member of a group of companies and has notified an election under subsection (1)(d) is not required under this section to use the modified fair value method for a financial arrangement if— (a) the person does not have a business of a substantially similar nature to a business of another company in the group; and (b) the financial arrangement is with other parties, of which— (i) none are associated with the person or a member of the group; or (ii) all are associated with the person and use the method used by the person for the arrangement; and (c) subsection (3) does not require the person to use the modified fair value for the financial arrangement. Method chosen (2) The person must use the fair value method, modified so that the following are not required to be allocated to an income year: (a) an amount allocated by the person to equity reserves under IFRSs for the financial arrangement: (b) an amount not allocated by the person to equity reserves under IFRSs for the financial arrangement, if— (i) the person and another person (the other person ) are members of the same wholly-owned group; and (ii) the person and the other person are members of the same group consolidated under IFRSs; and (iii) the financial arrangement is related to an arrangement (the other arrangement ) of the other person; and (iv) the other person does not use the fair value method for the other arrangement; and (v) the group consolidated under IFRSs makes an allocation, to equity reserves under IFRSs, corresponding to the amount. Some financial arrangements with amounts allocated to equity reserves (3) A person who is a member of a wholly-owned group and of a group consolidated under IFRSs (the consolidated group ) must use the modified fair value method for a financial arrangement if— (a) the person or the consolidated group allocates an amount to equity reserves under IFRSs for the financial arrangement; and (b) a member of the consolidated group, under subsection (2)(b), does not allocate to the income year an amount for a financial arrangement. Defined in this Act: amount , business , Commissioner , company , derivative instrument , fair value method , financial arrangement , group of companies , IFRS , notify , return of income , wholly-owned group Compare: 2004 No 35 s EW 15E(1), (3) Section EW 15G: inserted, on 1 April 2008, by section 366 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 15G(1)(c): substituted (with effect on 1 April 2008), on 6 October 2009, by section 138(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(1)(c)(ii): amended (with effect on 1 April 2008), on 7 September 2010, by section 38 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section EW 15G(1)(c)(iii): added (with effect on 1 April 2008), on 7 September 2010, by section 38 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section EW 15G(1)(d): substituted (with effect on 1 April 2008), on 6 October 2009, by section 138(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(1B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 138(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(1B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 138(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(2): substituted (with effect on 1 April 2008), on 6 October 2009, by section 138(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(3) heading: added (with effect on 1 April 2008), on 6 October 2009, by section 138(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G(3): added (with effect on 1 April 2008), on 6 October 2009, by section 138(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 15G list of defined terms wholly-owned group : added (with effect on 1 April 2008), on 6 October 2009, by section 138(6) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).