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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 16: Yield to maturity method or alternative

You could also call this:

“Calculating income for financial arrangements using yield to maturity or a similar method”

You can use the yield to maturity method for a financial arrangement if you’re not required to use a method under section EW 15B.

You can also use a different method instead of the yield to maturity method if you’re not required to use a method under section EW 15B. However, if you choose a different method, it must:

  1. Consider the principles of accrual accounting.
  2. Follow what’s normally accepted in business.
  3. Give results that are very similar to what you’d get using the yield to maturity method.
  4. Be the same method you use for financial reporting for similar arrangements. But section EW 23 might apply if you don’t use it this way.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515268.

Topics:
Money and consumer rights > Taxes
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EW 15I: Mandatory use of yield to maturity method for some arrangements, or

“Special calculation method required for certain financial arrangements”

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EW 17: Straight-line method, or

“How to calculate income tax using the straight-line method for financial arrangements”

Part E Timing and quantifying rules
Financial arrangements rules

EW 16Yield to maturity method or alternative

  1. A person who is a party to a financial arrangement may use the yield to maturity method, if the person is not required to use a method under section EW 15B.

  2. A person who is a party to a financial arrangement may use an alternative to the yield to maturity method, if the person is not required to use a method under section EW 15B, but may do so only if the alternative—

  3. has regard to the principles of accrual accounting; and
    1. conforms with commercially acceptable practice; and
      1. results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using the yield to maturity method; and
        1. is also used by the person for financial reporting purposes for financial arrangements that are the same as, or similar to, the arrangements, although section EW 23 may apply if the alternative is not used in this way.

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          Notes
          • Section EW 16(1): amended, on , by section 367(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 16(2): amended, on , by section 367(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
          • Section EW 16 list of defined terms IFRS: inserted, on , by section 367(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).