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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 21: Financial reporting method

You could also call this:

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

You can use a financial reporting method for a financial arrangement if you meet certain conditions. You can use this method if you can’t use the yield to maturity method or an alternative. You also need to either not be allowed to use the straight-line method or market valuation method, or choose not to use them if you are allowed.

You must not be required to use a method under section EW 15B. The Commissioner must not have made a determination for your financial arrangement under section 90AC(1)(d) of the Tax Administration Act 1994.

Your method needs to follow commercially acceptable practice. You also need to use the same method for financial reporting purposes for arrangements that are the same or similar to yours. However, section EW 23 might apply if you don’t use the method this way.

Finally, your method must allocate a reasonable amount to each income year over the term of your financial arrangement.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515278.

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Part E Timing and quantifying rules
Financial arrangements rules

EW 21Financial reporting method

  1. A person who is a party to a financial arrangement may use a financial reporting method 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 Commissioner has not made a determination for the financial arrangement under section 90AC(1)(d) of the Tax Administration Act 1994; and
            1. the method conforms with commercially acceptable practice; 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 arrangement (although section EW 23 may apply if the method is not used in this way); and
                1. the method allocates a reasonable amount to each income year over the financial arrangement's term.

                  Notes
                  • Section EW 21: substituted (with effect on 1 April 2008), on , by section 141 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).