Page 113 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes PN 4/1999 5.4 The debt was recorded on the transaction date at the forward rate, for accounting purposes. The stock was
recorded at spot rate.
Accounting recording of the transaction Dr Purchases (Stock)
Dr Premium on forward exchange contract
R637 000 R12 000
Cr Creditor
R649 000
Although the creditor was recorded at the forward rate, the cost price of the stock purchased was xed at the spot rate. The forward exchange contract was not recorded separately.
YEAR END 28-02-1998 Debt
Ruling exchange rates:
Transaction date (01-12-1997) Date of translation (28-02-1998)
Exchange difference:
[(6,4900 – 6,4900) x $100 000]
Premium:
Note:
6,4900 6,4900
[(6,4900 – 6,3700) x $100 000]
R nil R12 000
The premium of R12 000 complies with the provisions of section 24I(4)(b) and must be spread on a day-to-day basis over the period of the forward exchange contract.
Portion of the exchange difference allocated to the 1998 year of assessment (R12 000 x 3 ÷ 6)
Forward exchange contract
Ruling exchange rates: Transaction date (01-12-1997) Date of translation (28-02-1998)
Exchange difference:
[(6,4900 – 6,4900) x $100 000]
YEAR END 28-02-1999 Debt
Portion of the premium portion of the exchange difference on 28-02-1998 allocated to the 1999 year of assessment
(R12 000 x 3 ÷ 6)
6,4900 6,4900
R6 000 loss
R nil
R6 000 loss
SAIT CompendIum oF TAx LegISLATIon VoLume 2 105