Financial arangement

Question 2

What is a financial arrangement?

Answer 2

Persons receives money in consideration for
That person or another person, providing money to another person
At future time OR on occurrence or non-occurrence of future event

Question 3

what arrangements are there that are not subject to the rules?

Answer 3

• Bet
• Employment contract
• Interest in a partnership
• Interest in a look-through company
• Share or option to acquire a share
• lease

Question 4

What is required from financial rules arrangement?

Answer 4

Spreading method to calculate income or expenditure and to allocate to income year AND;
Calculation of base price adjustment when cease to be party to FA

Question 5

Financial arrangements rules distinguished between?

Answer 5

-Cash basis person (cash basis person is not required to use spreading method)
-Accruals (non-cash) basis person

Question 6

Cash Basis Formula

Answer 6

Face value * (annual interest rate / number of payments)

Question 7

Accrual Basis Formula

Answer 7

• Total Finance charge
  = Face Value + Interest - Purchase price

Straight line spreading method
= Total finance charge / number periods

Question 8

What is a BPA?

Answer 8

A base price adjustment is done in the year the financial arrangement cease to exist. e.g. disposal, maturity, payed back etc.
do not applying spreading method in this year

Question 9

BPA Formula

Answer 9

Consideration-Income+Expenditure+Amount remitted

Question 10

Positive BPA means…

Answer 10

Assessable income

Question 11

Negative BPA means…

Answer 11

Interest Incurred
- Deductible if it meets permission and no limitation applies