Page 25 - P6 Slide Taxation - Lecture Day 5 - Foreign Exchange
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22.4. AFFECTED CONTRACTS
• See definition in s 24I(1)
• Applicable to 2 types of contracts:
→ FEC & FCOC
• Why "affected"?
→ A hedging instrument that is hedging nothing = affected!
• When should it be determined if a FEC or FCOC is "affected"?
→ At year-end.
If a hedging instrument has been taken out to hedge a debt, but at year-end
the debt has not been "incurred/accrued", the hedge will be classified as
"affected".
• How must the "debt" be used in order to qualify?
→ To acquire an asset (will trading stock also be included?); or
→ to finance an expense.
If it is a "receivable debt" it must be receivable due to the disposal of an
asset or due to the supply of any services.
