Page 133 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes See calculation in table above
YEAR END 28-02-1995 Debt – paid
Ruling exchange rates:
Date of previous translation (28-02-1994) Date of realisation (01-09-1994)
Exchange difference:
[(3,4500 – 3,6400) x $300 000]
Transitional exchange difference See calculation in table above
NET TAX RESULT
(- R60 000 – R135 000 – R60 000 – R120 000 – R60 000 - R57 000 – R60 000)
RECONCILIATION
Cost price of stock on transaction date
($900 000 x 2,5000)
Rands used to pay for $300 000 on 01-09-1992 ($300 000 x 2,8500)
Rands used to pay for $300 000 on 01-09-1993 ($300 000 x 3,2500)
Rands used to pay for $300 000 on 01-09-1994 ($300 000 x 3,6400)
PN 4/1999
Net loss
R57 000 loss R60 000 loss
R672 000 loss
R2 250 000 (R855 000) (R975 000)
(R1 092 000) R672 000
EXAMPLE 15
ROLL-OVER OF A FORWARD EXCHANGE CONTRACT
On 1 May 1996 a company which specialises in the transport of liquid chemicals ordered a special delivery vehicle from the United States of America. The vehicle was to be delivered and brought into use in May 1998. The purchase price of the vehicle was xed at $200 000.
An amount of $100 000 was payable on 1 May 1996 and $100 000 on 30 April 1998. The company entered into a forward exchange contract on 1 May 1996. In terms of this contract $100 000 would be purchased on 30 April 1997, at a forward rate of 4,6000. On 30 April 1997 the forward exchange contract was realised and a new forward exchange contract was entered into. In terms of the latter contract $100 000 would be purchased on 30 April 1998 at a forward rate of 5,9200. (In other words the rst forward exchange contract was rolled over). The company’ s nancial year ends on 30 April.
3,4500 3,6400
MARKET RATES FOR PURPOSES OF THE EXAMPLE
DATE
SPOT RATE R/$
FORWARD RATE
01-05-1996
4,3500
4,6000 (12 months)
30-04-1997
5,6600
5,9200 (12 months)
30-04-1998
6,8700
SAIT CompendIum oF TAx LegISLATIon VoLume 2 125