CRA indicates that accrual-basis taxpayers should not usually net bad or doubtful debt allowances against their qualifying revenues
2 September 2020 - 12:01am
Recently-enacted s. 125.7(4)(e)(ii) allows an eligible entity to elect “to determine its qualifying revenues based on … the accrual method, in accordance with generally accepted accounting principles." CRA indicated that:
- when using the accrual method in accordance with its normal accounting practices, an eligible employer should usually not be able to deduct its bad debts (or an allowance therefor), when determining its qualifying revenue.
- discounts are generally netted against revenue under common accounting practices in Canada (although whether a particular eligible entity deducts discounts from its qualifying revenue will depend on its normal accounting practices); and that the above election is not intended to allow an eligible entity to change how it records its discounts under its normal accounting practices.