CRA indicates that the percentage of completion method can be used in computing qualifying revenue, but not marking securities to market

S. 125.7(4) requires that qualifying revenue of an eligible entity generally “be determined in accordance with its normal accounting practices.” CRA considers that:

“[R]evenue” under normal accounting practices generally requires the satisfaction of certain performance obligations, such as the sale of goods or the performance of services that would typically result in a corresponding inflow of cash, accounts receivables or other consideration.

CRA applied this test to find that the “revenue reported by the entity under the percentage of completion method would generally be considered ‘qualifying revenue’,” whereas mark-to-market valuation adjustments made by to the carrying value of investments by investment and brokerage firms would not give rise to an “inflow of cash, receivables or other consideration” under the above test, so that such (unrealized) gains or /losses would not affect qualifying revenue.

Neal Armstrong. Summary of 21 September 2020 External T.I. 2020-0855831E5 under s. 125.7(4).