Page 138 - SAIT Compendium 2016 Volume2

PN 4/1999 Income Tax acT: PracTIce noTes PN 4/1999
28-02-1997
4,7600
5,5600 (2 years)
[4,7600 + (4,6500 -3,0500) x 2 ÷ 4]
29-02-1998
5,1500
5,5500 (1 years)
[5,1500 + (4,6500 -3,0500) x 1 ÷ 4]
28-02-1999
6,5000
6,5000 (0 years)
[6,5000 + (4,6500 -3,0500) x 0 ÷ 4]
Note:
The market related forward rates for the remaining periods of the forward exchange contract are determined on each date of translation by dividing the premium in respect of that forward exchange contract, over the period thereof, on a straight line basis (see method 2 in example 2).
YEAR END
EXCHANGE DIFFERENCES
CASH BALANCE ($50 000)
FORWARD EXCHANGE CONTRACT
NET
29-02-1996
1+R35 000
2-R15 000
+R20 000
28-02-1997
+R50 500
-R30 500
+R20 000
29-02-1998
+R19 500
+R500
+R20 000
28-02-1999
+R67 500
-R47 500
+R20 000
TOTAL
+R172 500
-R92 500
+R80 000
Note:
The net exchange difference represents the gain made, which is evenly spread over the period of the forward exchange contract.
Calculations:
1. [(3,0500 – 3,7500) x $50 000] 2. [(4,6500 – 4,9500) x $50 000]
RECONCILIATION
Rands paid by the bank on transaction date to purchase dollars ($50 000 x 3,0500)
Rands received from the client on the maturity date of the forward exchange contract
($50 000 x 4,6500)
Net gain
R152 500 R232 500
R 80 000
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SAIT CompendIum oF TAx LegISLATIon VoLume 2