Page 135 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes Date of previous translation (30-04-1997)
Date of realisation (30-04-1998)
Exchange difference postponed in terms of section 24I(7)(b) to the 1999 year of assessment:
[(5,9200 – 6,8700) × $100 000]
YEAR END 30-04-1999
Exchange difference carried forward from the 1997 and 1998 years of assessment
(- R131 000 + R106 000 – R121 000 + R95 000)
NET TAX RESULT RECONCILIATION
Cost price of a vehicle on 1 May 1996 ($200 000 x 4,3500)
Rands used for rst $100 000 payment ($100 000 x 4,3500)
Rands received on realisation of rst forward exchange contract
Rands used for second $100 000 payment ($100 000 x 5,9200)
5,9200 6,8700
R51 000 loss R51 000 loss
R870 000 (R435 000)
R106 000 (R592 000) R51 000
PN 4/1999
R95 000 gain
Net loss
EXAMPLE 16
AFFECTED CONTRACT IN RESPECT OF INTEREST
On 1 July 1997 a company which manufactures prescription medicines purchased equipment to be used in its production process. The purchase price of the equipment was xed at $300 000. An amount of $200 000 was payable on 1 July 1997 and $100 000 on 31 December 1997. Interest of 12% per annum was charged on the instalment of $100 000 from 1 July 1997 and was payable on 31 December 1997. The company entered into a forward exchange contract on 1 July 1997. In terms of the contract the company would purchase $106 000 on 31 December 1997, at a forward rate of 4,7000. The company’s nancial year ends on 31 August. The company recorded the transaction at forward rates.
MARKET RATES FOR PURPOSES OF THE EXAMPLE
DATE
SPOT RATE R/$
01-07-1997
4,6500
31-08-1997
4,6800
31-12-1997
4,7500
SAIT CompendIum oF TAx LegISLATIon VoLume 2 127