(1)     For the purposes of this section, unless the context otherwise indicates –

“accrual amount”, in relation to an accrual period, means an amount determined in accordance with the following formula:

A = B x C

in which formula –

(a)     “A” represents the amount to be determined;

(b)     “B” represents the yield to maturity; and

(c)     “C” represents the adjusted initial amount:

Provided that –

(i)      where the commencement or end of any year of assessment falls within an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to that part of such accrual period falling within the year of assessment so commencing or ending, as the case may be;

(ii)     where an instrument is transferred on a date other than at the end of an accrual period, the amount so determined shall be apportioned on a day to day basis over the term of such accrual period in order to determine the relevant portion of such amount relating to the relevant transferor or transferee, as the case may be, in relation to such instrument; and

(iii)    the amount so determined shall be appropriately adjusted by taking into account amounts received or payments made other than at the end of an accrual period;

“accrual period”, in relation to an instrument, means –

(a)     where in terms of such instrument regular payments at intervals of equal length and not exceeding 12 months per interval are to be made throughout the term of such instrument, the period between such regular payments; or

(b)     any period not exceeding 12 months elected by the holder or issuer, as the case may be,

which period shall be applied consistently throughout the term of such instrument;

“adjusted gain on transfer or redemption of an instrument” means –

(a)     in relation to the holder of any income instrument, where –

(i)      an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the accrual period in which such income instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to such accrual period and any payments made by such holder in terms of such income instrument during such accrual period; or

(ii)     an alternate method has been applied, the amount by which the sum of the transfer price or redemption payment of such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)     in relation to the issuer of any instrument, where –

(i)      an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to the accrual period during which such instrument is transferred or redeemed and any payments received by such issuer in terms of such instrument during the accrual period, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during such accrual period; or

(ii)     an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the transfer price or redemption payment in relation to such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

“adjusted initial amount” means –

(a)     in relation to the holder of an income instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments made by such holder during all such previous accrual periods less any payments received by such holder during all such previous accrual periods, in terms of such income instrument; or

(b)     in relation to the issuer of an instrument with regard to a particular accrual period, the sum of the initial amount and the accrual amounts in relation to all previous accrual periods and any other payments received by such issuer during all such previous accrual periods less any payments made by such issuer during all such previous accrual periods, in terms of such instrument: Provided that where that instrument forms part of any transaction, operation or scheme –

(i)      any payments made by the issuer to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to the holder, must be deducted for purposes of this paragraph; and

(ii)     in the case where any party to that transaction, operation or scheme is a connected person in relation to that issuer, any payments made by that connected person to any other person pursuant to that transaction, operation or scheme with a purpose or with the probable effect of making payment directly or indirectly to the holder or a connected person in relation to die holder, must be deducted for purposes of this paragraph;

“adjusted loss on transfer or redemption of an instrument” means –

(a)     in relation to the holder of any income instrument, where –

(i)      an alternative method has not been applied, the amount by which the sum of the adjusted initial amount in relation to such income instrument and the accrual amount in relation to the accrual period during which such income instrument is transferred or redeemed and any payments made by such holder in terms of such income instrument during such accrual period, exceeds the sum of the transfer price or redemption payment in relation to such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during such accrual period; or

(ii)     an alternative method has been applied, the amount by which the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments made by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder, exceeds the sum of the transfer price or redemption payment in relation to such income instrument in relation to such holder and any payments received by such holder in terms of such income instrument during the period from acquisition until transfer or redemption of such income instrument by such holder; or

(b)     in relation to the issuer of any instrument, where –

(i)      an alternative method has not been applied, the amount by which the sum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the accrual period during which such instrument is transferred or redeemed, exceeds the sum of the adjusted initial amount in relation to such instrument and the accrual amount in relation to such accrual period and any payments received by such issuer in terms of such instrument during such accrual period; or

(ii)     an alternative method has been applied, the amount by which the sum of the transfer price or redemption payment of such instrument in relation to such issuer and any payments made by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer, exceeds the sum of the initial amount and all amounts determined in accordance with such alternative method and any other payments received by such issuer in terms of such instrument during the period from issue or acquisition until transfer or redemption of such instrument by such issuer;

“alternative method” means a method of calculating interest in relation to any class of instruments which-

(a)     is in accordance with IFRS;

(b)     is consistently applied in respect of all such instruments for all financial reporting purposes; and

(c)     method achieves a result in so far as the timing of the accrual and incurral of interest is concerned which produces substantially the same result achieved by the application of the provisions of subsections (2)(a) and (3)(a);

[Definition of “alternative method” substituted by section 43 of Act 17 of 2017 effective on 18 December 2017]

“date of redemption”, in relation to an instrument, means-

(a)     where-

(i)      the terms of that instrument specify a date on which all liability to pay all amounts in terms of that instrument will be discharged; and

(ii)     the date so specified is not, in terms of the instrument, subject to change, whether as a result of any right, fixed or contingent, of the holder of that instrument or otherwise,

that date; or

(b)     where-

(i)      the terms of that instrument do not specify a date as contemplated in paragraph (a)(i); or

(ii)     that date, if so specified, is subject to change as contemplated in paragraph (a)(ii),

the date on which, on a balance of probabilities, all liability to pay all amounts in terms of that instrument is likely to be discharged;

“deferred interest” includes –

(a)     any interest where such interest (or any portion thereof), calculated in respect of any accrual period falling within the term of any instrument by applying a constant interest rate throughout the term of such instrument, is not payable or receivable in terms of such instrument within one year from the date of the commencement of such accrual period; and

(b)     any interest payable or receivable in terms ol any instrument where such interest is not calculated by applying a constant interest rate throughout the term of such instrument;

“fixed rate instrument” means an instrument in terms of which the amount or amounts payable or receivable is or are or consists of or consist of –

(a)     a specified amount or specified amounts;

(b)     an amount or amounts the method of calculation of which does not involve the application of a variable rate; or

(c)     any combination of amounts referred to in paragraph (a) or (b);