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Income Tax Act 2007

Timing and quantifying rules - Valuation of excepted financial arrangements

ED 4: Valuation of certain excepted financial arrangements denominated in foreign currency

You could also call this:

“Valuing certain foreign currency financial deals at year-end exchange rates”

If you have a special financial arrangement in a foreign currency, this law tells you how to value it. This applies to you if you have this type of arrangement in a given year (called the current year) and you have an amount of foreign money to pay or receive at the end of that year.

You can choose to value the foreign money amount using the exchange rate at the end of the current year. But you can only do this if you already use end-of-year values for foreign currency in your financial statements.

If you decide to value your foreign currency payments this way for one year, you must do the same for all similar arrangements in that year and in future years.

The law mentions some specific types of financial arrangements in section EW 5(21) to (25). These are the only types of arrangements this rule applies to.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5499759.

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Part E Timing and quantifying rules
Valuation of excepted financial arrangements

ED 4Valuation of certain excepted financial arrangements denominated in foreign currency

  1. This section applies to a person who, in an income year (the current year),—

  2. has an excepted financial arrangement, of a type (the arrangement type) described in section EW 5(21) to (25) (What is an excepted financial arrangement?), denominated in a foreign currency; and
    1. has an amount of foreign currency payable or receivable under the excepted financial arrangement (a foreign currency payment) at the end of the current year.

      1. The person may choose to value a foreign currency payment at the close of trading spot exchange rate applicable at the end of the current year, if the person, in preparing financial statements, determines values at the end of the income year for amounts of foreign currency payable or receivable by the person.

      2. If foreign currency payments under a person's excepted financial arrangement are valued under subsection (2) for an income year, the amounts of foreign currency payable or receivable under all of the person's excepted financial arrangements of the arrangement type are valued in the same way for the income year and later income years.

      Notes
      • Section ED 4: inserted (with effect on 27 September 2012 and applying for a person and an excepted financial arrangement on and after that date, except if the person takes a tax position for the excepted financial arrangement, relying on an election made under section EW 8 before its amendment by the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013, in a return of income received by the Commissioner before that date or under a determination or binding ruling made by the Commissioner before that date), on , by section 45(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).