Division 230 - Taxation of financial arrangements  

Subdivision 230-B - The accruals/realisation methods  

The accruals method

SECTION 230-140   Method of spreading gain or loss - effective interest method  

This section clarifies that the method mentioned in subsection (2) of spreading gains and losses is a method covered by paragraph 230-135(2)(b) (methods approximating compounding accruals).

The method is the effective interest method mentioned in *accounting standard AASB 139 (or another accounting standard prescribed by the regulations for the purposes of this subsection).

However, this section applies to a particular *financial arrangement you have only if:

(a) in a case where there is a discount or premium under the arrangement - when you start to have the arrangement, the annually compounded rate of return applicable to the discount or premium does not exceed 1%; and

(b) when you start to have the arrangement, neither the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) nor the expected life of the arrangement exceeds:

(i) unless subparagraph (ii) applies - 30 years; or

(ii) if the regulations prescribe a different period for the purposes of this subparagraph - that period; and

(c) each *financial benefit that you have an obligation to provide or a right to receive under the arrangement, and that gives rise to a gain or loss from the arrangement (other than a gain or loss that is attributable to any discount or premium):

(i) relates to a period not exceeding 12 months; and

(ii) is to be provided or received in the period to which it relates; and

Different financial benefits may relate to different periods.

(d) you prepare a financial report for the year in which you start to have the arrangement; and

(e) that financial report is:

(i) prepared in accordance with paragraph 230-210(2)(a) ; and

(ii) audited in accordance with paragraph 230-210(2)(b) ; and

(f) all gains and losses from the arrangement to which the accrual method applies are spread in a way that is consistent with that financial report.

For the purposes of paragraph (3)(a), assume that you will continue to have the arrangement for the rest of its expected life.


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