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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 24: Consistency of use of spreading method

You could also call this:

“Use the same spreading method for similar financial arrangements each year”

You need to use the same method for spreading financial arrangements that are the same or similar every year. This means you can’t change your method from year to year for the same types of arrangements.

There are special rules for consistency when you use the straight-line method or a market valuation method. You can find these rules in Section EW 25.

If you prepare your financial reports using IFRS (International Financial Reporting Standards), there’s a specific consistency rule you need to follow. This rule is explained in Section EW 25B.

Sometimes, you might be allowed to change your spreading method. The situations when you can do this are described in Sections EW 26 and HM 35(8)(c).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515284.

Topics:
Money and consumer rights > Taxes
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EW 23: Failure to use method for financial reporting purposes, or

“Using alternative financial reporting methods with approval”

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EW 25: Consistency of use of straight-line method and market valuation method, or

“Rules for consistently using straight-line or market valuation methods for financial arrangements”

Part E Timing and quantifying rules
Financial arrangements rules

EW 24Consistency of use of spreading method

  1. A person must use the same spreading method for financial arrangements that are the same as, or similar to, the arrangements for every income year. This subsection is overridden by subsection (3).

  2. Section EW 25 sets out particular consistency requirements for the straight-line method and a market valuation method.

  3. Section EW 25B sets out a particular consistency requirement for a method for IFRS preparers.

  4. Sections EW 26 and HM 35(8)(c) (Determining net amounts and taxable amounts) set out the circumstances in which a person may change their spreading method.

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Notes
  • Section EW 24(2B) heading: inserted, on , by section 375(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
  • Section EW 24(2B): inserted, on , by section 375(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
  • Section EW 24(3): amended, on , by section 55(1) (and see section 55(2) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
  • Section EW 24 list of defined terms IFRS: inserted, on , by section 375(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).