Section EW 26 — Income Tax Act 2007: Change of spreading method

EW 26 Change of spreading method Requirements for change from straight-line and market value method (1) A person may change from the straight-line method or the market value method if they change to a method that is not a method for IFRS under section EW 15B , and the Commissioner has given written authorisation for the change. Change of other method (2) A person may change from any spreading method to any other method if the Commissioner's written authorisation under subsection (1) is not required for the change, and they have a sound commercial reason for the change. The advancement, deferral, or reduction of an income tax liability is not a sound commercial reason. Spreading method adjustment (3) When a person changes their spreading method under subsection (2),— (a) they must use the formula in section EW 27 to calculate a spreading method adjustment for the income year in which they change the method; and (b) their only income or expenditure under the financial arrangement for the income year to which the formula is applied is the spreading method adjustment. Positive or negative spreading method adjustment (4) A spreading method adjustment calculated under section EW 27 is,— (a) if positive, income, under section CC 3 (Financial arrangements), derived by the person in the income year for which the calculation is made: (b) if negative, expenditure incurred by the person in the income year for which the calculation is made. Application of Tax Administration Act 1994 (5) Section 22A(2) of the Tax Administration Act 1994 applies to a person to whom subsection (2) applies. Exception for fair value method (6) Section EW 29(13) applies, and subsections (3) and (4) do not apply, to a financial arrangement, if the person’s change of spreading method involves a change— (a) from the fair value method and the financial arrangement is not subject to a creditor workout: (b) from the market value method to a method for IFRS under section EW 15B . Meaning of sound commercial reason (7) In this section, sound commercial reason includes— (a) starting or stopping the use of IFRSs to prepare financial statements at the same time as starting or stopping the use of a method for IFRS under section EW 15B : (b) starting to use a method for IFRS under section EW 15B for a financial arrangement for the first time. Modification (8) Section EZ 52C (Change of spreading method: Determination G22 to Determination G22A ) modifies this section. Defined in this Act: Commissioner , creditor workout , fair value method , financial arrangement , financial statements , IFRS , income , income tax liability , income year , sound commercial reason , spreading method , Compare: 2004 No 35 s EW 26 Section EW 26(1) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 145(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 145(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 145(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26(6) heading: added, on 1 April 2008, by section 377(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26(6): substituted (with effect on 1 April 2008), on 6 October 2009, by section 145(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26(7) heading: added, on 1 April 2008, by section 377(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26(7): added, on 1 April 2008, by section 377(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26(7)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 145(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26(8) heading: added, on 26 September 2010, by section 39 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section EW 26(8): added, on 26 September 2010, by section 39 of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109). Section EW 26 list of defined terms creditor workout : inserted (with effect on 1 April 2008), on 6 October 2009, by section 145(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section EW 26 list of defined terms fair value method : inserted, on 1 April 2008, by section 377(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26 list of defined terms financial statements : inserted, on 1 April 2008, by section 377(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26 list of defined terms IFRS : inserted, on 1 April 2008, by section 377(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109). Section EW 26 list of defined terms sound commercial reason : inserted, on 1 April 2008, by section 377(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).