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Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

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

You could also call this:

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

If you start using the straight-line method for a financial arrangement, you need to use it for all your financial arrangements that you can use it for at the end of the income year.

You must keep using the straight-line method for the whole time you have the arrangement, until you need to work out a base price adjustment. This is true even if the total value of all your financial arrangements goes over $1,850,000.

If you start using a market valuation method for a financial arrangement, you need to keep using it for the whole time you have the arrangement, until you need to work out a base price adjustment.

The Governor-General can make an order to change the $1,850,000 amount to a different number.

Remember, there are some exceptions to these rules. You can find more information about these exceptions in section EW 26(1) for the straight-line method and section EW 6(1) for the market valuation method.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515286.

Topics:
Money and consumer rights > Taxes
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EW 24: Consistency of use of spreading method, or

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EW 25B: Consistency of use of IFRS method, or

“Keeping the same IFRS method for similar financial arrangements”

Part E Timing and quantifying rules
Financial arrangements rules

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

  1. A person using the straight-line method in an income year for a financial arrangement must use it for all financial arrangements—

  2. to which the person is a party at the end of the income year; and
    1. for which the person can use it.

      1. A person who starts to use the straight-line method for a financial arrangement must use it over the arrangement’s remaining term until section EW 29 requires them to calculate a base price adjustment for the arrangement, unless section EW 26(1) applies.

      2. Subsection (2) applies even if the total value of all the financial arrangements to which the person is a party is over $1,850,000 at any time in the arrangement’s remaining term.

      3. A person who starts to use a market valuation method for a financial arrangement must use it over the arrangement’s remaining term until section EW 29 requires them to calculate a base price adjustment for the arrangement, unless section EW 6(1) applies.

      4. The Governor-General may make an Order in Council under section EW 17(3) increasing the sum specified in subsection (3).

      Compare
      Notes
      • Section EW 25(3) heading: amended, on , by section 8(1) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
      • Section EW 25(3): amended, on , by section 8(2) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).