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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 18: Market valuation method

You could also call this:

“Using market values to determine the worth of financial arrangements”

You can use a market valuation method for a financial arrangement if you meet certain conditions. These conditions include:

You deal in similar financial arrangements as part of your business, or the arrangement is a specific type like an exchange-traded option.

You and the other party in the arrangement are not closely related.

You can show that the market values you’re using are reliable. This could be because the Commissioner has approved the market and method you’re using, or because you can prove the prices are dependable.

The method you’re using follows what’s normally done in business.

You follow the rules set out in section EW 25(4).

You use the same method when you report on your finances for arrangements that are the same or similar. However, section EW 23 might apply if you don’t use the method in this way.

You’re not required to use a different method under section EW 15B.

If you’re relying on your own proof that market prices are reliable, you need to follow Section 22A(1) of the Tax Administration Act 1994.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515272.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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“How to calculate income tax using the straight-line method for financial arrangements”

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EW 19: Choice among some spreading methods, or

“Choosing how to spread income from financial arrangements”

Part E Timing and quantifying rules
Financial arrangements rules

EW 18Market valuation method

  1. A person who is a party to a financial arrangement may use, for the arrangement, a market valuation method if—

  2. either—
    1. the person’s business includes dealing in financial arrangements of the class to which the arrangement belongs; or
      1. the financial arrangement is an exchange-traded option, a forward contract for foreign exchange, or a futures contract; and
      2. the parties to the financial arrangement are not associated persons; and
        1. either—
          1. the Commissioner has approved the market, the method, and the source of information used to determine market values by a determination under section 90AC(1)(c) of the Tax Administration Act 1994; or
            1. the person can demonstrate market prices that are reliable; and
            2. the method conforms with commercially acceptable practice; and
              1. the person complies with section EW 25(4); and
                1. the method 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 method is not used in this way; and
                  1. the person is not required to use a method under section EW 15B.

                    1. Section 22A(1) of the Tax Administration Act 1994 applies to a person to whom subsection (1)(c)(ii) applies.

                    Compare
                    Notes
                    • Section EW 18(1)(f): amended, on , by section 369(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section EW 18(1)(g): added, on , by section 369(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section EW 18 list of defined terms IFRS: inserted, on , by section 369(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).