A Comparison of the Accounting anbd Texation Approaches to Interest Rate Options Held with Trading Intention

Madeleine Stiglingh and Morne du Plessis

This study analyses the differences of the accounting and taxation treatment of gains and losses on interest rate options held with trading intention in South Africa. The accounting treatment of interest rate option held with a trading intention, is regulated by AC133. Very clear but complex rules are stipulated. The taxation consequences of interest rate options are, however, more problematic. It was found that the total loss or profit accounted for on an option contract would be the same for taxation and accounting purposes, however, the timing thereof could fall within different financial periods. It was also found that the intention of the legislature is not very clear on whether interest rate options could be regarded as trading stock or not.

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