Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
REVENUE CANADA INCOME TAX PANEL T.E.I. ANNUAL CANADIEN TAX CONFERENCE - MAY 1993
Question # 22
The C.I.C.A. has recently issued an abstract, E.I.C. 42 "Costs Incurred on Business Combinations". E.I.C. 42 requires that expenses incurred in effecting a business combination should be included as part of the cost of the purchase. Costs to be capitalized for accounting purposes would include fees paid to lawyers, accountants, appraisers and other consultants as well as restructuring and integration costs related directly to the acquisition.
Does the department view the restructuring and integration costs as current expenses of the business? If not, why not?
Answer
Our basic position is that generally, the profit or loss from a business for purposes of section 9 of the Income Tax Act should be determined in accordance with generally accepted accounting principles unless specific provisions of the Act require departure therefrom. Generally, expenses and outlays incurred in effecting a business combination would be included as part of the cost of the assets acquired. It is a question of fact whether expenses and outlays are current expenses or payments on account of capital but generally restructuring and integration costs incurred after completion of and as a consequence of the combination to improve the running of the business would be deductible.
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