Page 31 - Chapter 22 - Foreign Exchange (Cont.)

Example: s8(4)(a)

A Ltd’s year of assessment ends on the last day of February. On

1 November 2013, the company sold trading stock to a client in

another country for a foreign currency (FC) amount of FC90

000. The customer was liquidated and A Ltd wrote off the full

selling price as bad debt on 28 February 2014. A Ltd received a

payment of 50 cents in the FC from the liquidator of the

customer on 10 May 2014.

Assume that the exchange rates on the relevant dates are as

follows:

 1 November 2013 : spot rate FC1 = R6,60

 28 February 2014 : spot rate FC1 = R6,90

 10 May 2014 : spot rate FC1 = R7,00

Calculate the effect on the taxable income of A Ltd.