Coppley Noyes & Randall Ltd. v. The Queen, 91 DTC 5291 (FCTD), varied on appeal 93 DTC 5196, 5508 (FCA).

Before going on to affirm the deductibility under s. 20(1)(l) of an allowance for doubtful accounts which the taxpayer had taken for tax and financial statement purposes, Reed J. stated (p. 5297):

"... in determining a reserve for doubtful debts, the principal factors that are used for the preparation line.gifl statements, as governed by the generally accepted accounting principles approved by the Canadian Institute of Chartered Accountants, are applicable, unless: (1) the Income Tax Act expressly requires otherwise or (2) the Income Tax Act implicitly requires otherwise."

The taxpayer's practice, in determining its allowance for doubtful accounts at the end of its taxation year on November 27, 1082, included having regard to payments made by trade debtors during the three months after that its year end, but treating receipts as going to the oldest receivables first. Reed J stated (at p. 5294):

When neither the debtor nor creditor designates that a payment is to be applied to a specific invoice, it is assumed that the payment is being made to pay off the earliest debt: [citing inter alia Dunlop, Creditor-Debtor Law in Canada.]

In commenting on the Anaconda case, Reed J. stated (p. 5298):

"... I think it is well known that the reasoning of the Privy Council in overruling both the Exchequer Court and the Supreme Court of Canada has been widely criticized ... As I understand it, most commentators have been of the view that the choice of LIFO (last in first out) as a method of inventory costing is not in conflict with the purpose of the Income Tax Act providing that method is used consistently over the years by the taxpayer."

The taxpayer for tax and financial statements purposes claimed reserves for doubtful accounts which were significantly in excess of its actual bad debt write-offs for the following year in light of its policy of continuing to make sales to high risk and past due accounts rather than writing off such accounts. Reed J. accepted evidence that the reserves were claimed in accordance with generally accepted accounting principles, and found that the application of such principles "is more consonant with the purposes of the Act than is a departure therefrom" (p. 5302).