Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Financial arrangements rules

EW 25B: Consistency of use of IFRS method

You could also call this:

“Keeping the same IFRS method for similar financial arrangements”

When you use a method for IFRS under section EW 15C for a financial arrangement, you need to keep using it for the rest of the time you have that arrangement. You also need to use it for other arrangements that are the same or similar, unless the accounting rules say you should use a different method.

You can change your IFRS method if a new method becomes available to you and if the accounting rules for that financial arrangement change in the same year you want to change your tax method.

If you do change your method, some rules in section EW 26(3), (4) and EW 27 will apply. These rules treat the change as if it were a change under section EW 26(2). But these rules don’t apply if you’re changing from the fair value method and the financial arrangement isn’t part of a creditor workout.

Section EZ 52B changes the rules a bit about when you can change your IFRS method.

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 It might be out of date or be missing some parts.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

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1633119.

Topics:
Money and consumer rights > Taxes
Previous

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”

Next

EW 26: Change of spreading method, or

“Rules for changing how you spread income or expenses from financial arrangements”

Part E Timing and quantifying rules
Financial arrangements rules

EW 25BConsistency of use of IFRS method

  1. A person who uses a method for IFRS under section EW 15C for a financial arrangement must use the method for—

  2. the remaining term of the arrangement until section EW 29 requires them to calculate a base price adjustment for the arrangement:
    1. other financial arrangements that are the same as, or similar to, the arrangement unless a different accounting treatment under IFRSs is used.

      1. Despite subsection (1)(a), a person may change a method for IFRS if—

      2. the new method is available to them to use; and
        1. the accounting treatment for the financial arrangement under IFRSs is changed in the same income year in which the method is changed for tax purposes.

          1. For the purposes of subsection (2), section EW 26(3), (4), and EW 27 apply as if the change in method were a change under section EW 26(2). However, those sections do not apply if the change—

          2. is from the fair value method; and
            1. relates to a financial arrangement that is not subject to a creditor workout.

              1. Section EZ 52B (Consistency of use of IFRS method: Determination G3 change allowed) modifies subsection (2).

              Compare
              Notes
              • Section EW 25B: inserted, on , by section 376 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
              • Section EW 25B(3): amended (with effect on 1 April 2008), on , by section 20 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
              • Section EW 25B(3): amended (with effect on 1 April 2008), on , by section 144(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section EW 25B(3)(a): substituted (with effect on 1 April 2008), on , by section 20 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
              • Section EW 25B(3)(b): substituted (with effect on 1 April 2008), on , by section 20 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
              • Section EW 25B(4) heading: added (with effect on 1 April 2008), on , by section 144(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section EW 25B(4): added (with effect on 1 April 2008), on , by section 144(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
              • Section EW 25B list of defined terms creditor workout: inserted (with effect on 1 April 2008), on , by section 144(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).