Document ID: chunk:federal_register_of_legislation:C2025C00029:section:4:p36
Version: federal_register_of_legislation:C2025C00029
Segment Type: section
Provision Reference: s 4 (pt 36/55)
Character Range: 3886414–3889062

arrangement and you have determined on the reassessment under that section that the accruals method should continue to apply to those gains or losses.
 (3A) You also re‑estimate a gain or loss from a *financial arrangement under subsection (5) if:
 (a) the gain or loss is spread using the method referred to in paragraph 230‑135(2)(b) in accordance with section 230‑140 (effective interest method); and
 (b) you recalculate the effective interest rate in accordance with that method; and
 (c) the terms and conditions of the arrangement provide for reset dates to occur no more than 12 months apart; and
 (d) the maximum life of the arrangement (as determined under the terms and conditions of the arrangement) is more than 12 months.
 (3B) You must re‑estimate the gain or loss at the relevant reset date if subsection (3A) applies.
 (4) You do not re‑estimate the gain or loss from a *financial arrangement under subsection (5) merely because of a change in the credit rating, or the creditworthiness, of a party or parties to the arrangement.

Nature of re‑estimation
 (5) Making a re‑estimation in relation to a gain or loss under this subsection involves:
 (a) a fresh determination of the amount of the gain or loss; and
 (b) a reapplication of the accruals method to the redetermined gain or loss to make a fresh allocation of the part of the redetermined gain or loss that has not already been allocated to intervals ending before the re‑estimation is made to intervals ending after the re‑estimation is made.

Basis for re‑estimation
 (6) You may make the fresh allocation of the gain or loss under subsection (5) on these bases:
 (a) if you satisfy subsection (7) in relation to the *financial arrangement—by maintaining the rate of return being used and adjusting the amount to which you apply the rate of return to the present value of the estimated future cash flows discounted at the maintained rate of return;
 (b) in any case—by adjusting the rate of return and maintaining the amount to which the adjusted rate of return is to be applied.
The object to be achieved by both bases is to allow you to bring the remainder of the gain or loss based on the new estimates properly to account over the remainder of the period over which you spread the gain or loss.
Note: The amount referred to in paragraph (b) is the amount to which the previous rate of return was being applied immediately before the re‑estimation.
 (7) You satisfy this subsection in relation to a *financial arrangement if every re‑estimation you make under subsection (5) in relation to a gain or loss from the arrangement is made in accordance with:
 (a) financial