Principal Issues: 1. Would government assistance that is deferred and amortized into income in accordance with GAAP be considered a "reserve", "provision", "allowance" or "advance" for purposes of computing capital under subsection 181.2(3) of the Act?
2. Does the fact that the government assistance may become repayable at a future date if the recipient does not use the asset acquired with the funds in a manner required by the assistance agreement, result in the assistance being considered an "advance".
Position: 1. Generally no.
2. Generally no.
Reasons: 1. While each case would need be considered based on the terms and conditions of the specific assistance agreement, it is our general view that the deferred assistance balance would not be a "reserve", "provision" or "allowance" as those terms are defined for accounting purposes, nor would it constitute a legal advance provided the assistance funds were received when due under the terms and conditions of the assistance agreement.
2. The fact that the funds may become repayable at a future time because the recipient failed to continue to satisfy a requirement under the agreement would not in our view cause the funds, when received, to be considered an advance. In the event the funds do become repayable at a future time, the recipient will have a debt obligation that may or may not be included in capital.