Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
EW 21: Financial reporting method
or “Using financial reports to calculate income from certain financial arrangements”
You could also call this:

“How to use the default method when other methods don't apply to your financial arrangement”

You can use a default method for a financial arrangement if you can’t use other specific methods. You can use this method when you’re not allowed to use the yield to maturity method or an alternative. You also can’t use, or choose not to use, the straight-line method or market valuation method. Additionally, you’re not allowed to use a determination method, an alternative, or a financial reporting method.

The default method you choose must follow what’s normally accepted in business. It should also divide a fair amount of money to each year that the financial arrangement lasts.

Remember, you can only use this default method if it meets all these rules. It’s a way to handle your financial arrangement when other methods don’t work for you.

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 It might be out of date or be missing some parts.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 23: Failure to use method for financial reporting purposes

or “Using alternative financial reporting methods with approval”
Next

Part E Timing and quantifying rules
Financial arrangements rules

EW 22Default method

  1. A person who is a party to a financial arrangement may use a default 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 may not use a determination method or an alternative, or a financial reporting method; and
            1. the method conforms with commercially acceptable practice; and
              1. the method allocates a reasonable amount to each income year over the financial arrangement’s term.

                Compare
                Notes
                • Section EW 22(c): amended (with effect on 1 April 2008), on , by section 142 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                • Section EW 22(c): amended, on , by section 373(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                • Section EW 22(d): repealed, on , by section 373(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).