Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
EW 19: Choice among some spreading methods
or “Choosing how to spread income from financial arrangements”
You could also call this:

“Using an approved method or alternative when other methods aren't suitable”

If you are involved in a financial arrangement, you can use a method that the Commissioner has decided on if you can’t use the yield to maturity method or another option. This applies when you’re not allowed to use the straight-line method or market valuation method, or if you choose not to use them even though you can. However, you can’t use this method if you have to use a method under section EW 15B.

You can also use a different method instead of the Commissioner’s method, but only if you meet certain conditions. These conditions are similar to the ones for using the Commissioner’s method. Your alternative method must follow the principles of accrual accounting and be in line with what businesses usually do. It should give similar results to the Commissioner’s method. You also need to use this method when you report your finances for arrangements that are the same or similar, but section EW 23 might apply if you don’t use it this way.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: EW 21: Financial reporting method

or “Using financial reports to calculate income from certain financial arrangements”
Next

Part E Timing and quantifying rules
Financial arrangements rules

EW 20Determination method or alternative

  1. A person who is a party to a financial arrangement may use a determination method, that is, a method in a determination made by the Commissioner under section 90AC(1)(d) of the Tax Administration Act 1994 and applying to the arrangement, if—

  2. the person cannot use the yield to maturity method or an alternative; and
    1. the person—
      1. may not use the straight-line method or a market valuation method; or
        1. may use the straight-line method or a market valuation method but chooses not to do so; and
        2. the person is not required to use a method under section EW 15B.

          1. A person who is a party to a financial arrangement may use an alternative to a determination method, but may do so only if—

          2. the person cannot use the yield to maturity method or an alternative; and
            1. the person—
              1. may not use the straight-line method or a market valuation method; or
                1. may use the straight-line method or a market valuation method but chooses not to do so; and
                2. the person is not required to use a method under section EW 15B; and
                  1. the alternative has regard to the principles of accrual accounting; and
                    1. the alternative conforms with commercially acceptable practice; and
                      1. the alternative results in the allocation to each income year of amounts that are not materially different from those that would have been allocated using the determination method; and
                        1. the alternative 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.

                          Compare
                          Notes
                          • Section EW 20(1)(b)(ii): amended, on , by section 371(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EW 20(1)(c): added, on , by section 371(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EW 20(2)(bb): inserted, on , by section 371(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section EW 20 list of defined terms IFRS: inserted, on , by section 371(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).