Question 3

a) Macaw Finance Limited is a small finance company that deals with financial arrangements. During the 2023 tax year, the lowest value of financial arrangements that the company was party to was $2.35 million. The company derived interest of $147,462 from these financial arrangements during the year. Macaw Finance Limited has not lent to or borrowed from any associated persons. The company does not use IFRS to prepare its financial statements.

Task: Explain what spreading methods Macaw Finance Limited can use to allocate the interest income from its financial arrangements and provide the reasons.

b) Classify each of the following arrangements as a financial arrangement or an excepted financial arrangement and provide a relevant statutory reference to support your answer.

i. A finance lease of a motor vehicle.

ii. An agreement for the sale and purchase of a residential property, where the sale price is $995,000, and settlement takes place 6 months after the agreement is signed.

iii. Car insurance.