A new global standard on revenue

What this means for the life sciences industry

The International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board have issued their new standard on revenue – IFRS 15 Revenue from Contracts with Customers (ASU 2014-09 or Topic 606 in the U.S.). This bulletin summarizes the new requirements and what they will mean for entities in the life sciences industry that apply International Financial Reporting Standards (IFRS).

Recently issued IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts and provides new guidance addressing key questions such as:

  • When can I include a performance-based milestone payment in revenue?
  • When do bundled goods or services represent a separate performance obligation?
  • How do I account for collaborative research arrangements with customers?
  • Can extended payment terms affect the total amount of revenue recognized?
  • How should sales- or usage-based royalties be accounted for?
  • How do I know whether I should recognize revenue from an intellectual property licensing arrangement over time or at a point in time?

With IFRS 15’s potential to significantly impact the timing and amount of revenue recognized, entities in the life sciences industry will want to invest time up front to ensure all critical impacts are identified and understood well in advance of implementation.


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Federal Budget, April 21, 2015

It was to be expected that in this first balanced budget in the Conservative government’s eight years in power and, in the context of an election, measures would be introduced to stimulate wealth and employment, pivotal issues for the country’s growth.

The 2015 Economic Action Plan tabled today by the Honourable Joe Oliver, federal Minister of Finance, has provided for no income or commodity tax increases and includes attractive incentives to support Canadian individuals and businesses.

Among the measures to sustain Canada’s economic growth, of note is the decrease in the small business tax rate to 9% as of 2019. The current 11% rate will drop gradually, in 0.5% increments, starting in January 2016.

Another measure that supports the Canadian manufacturing sector’s competitiveness is the 10-year investment incentive for manufacturing businesses. Additionally, to encourage ongoing investment in machinery and equipment and increase productivity, manufacturers will be entitled to an accelerated CCA of 50%, declining balance, for eligible assets acquired after 2015 and before 2016.

On the innovation front, the government is announcing it will provide an additional $1.3 billion over six years to the Canada Foundation for Innovation to assist Canadian researchers.

In order to modernise infrastructures and create jobs, the federal government has opted to provide $5.35 billion per year on average for provincial, territorial and municipal infrastructure under the New Building Canada Plan. Additionally, it is creating a new Public Transit Fund and providing an additional $750 million over two years, starting in 2017–18, and $1 billion per year ongoing thereafter.

Of interest for individuals is the increase in the annual TFSA contribution limit from $5,500 to $10,000 and a new home accessibility tax credit as of 2016. A 15% tax credit on a maximum amount of $10,000 in expenditures incurred for this purpose.

Upcoming consultation

Lastly, there will be a consultation to review “the circumstances in which income from a business, the principal purpose of which is to earn income from property, should qualify as active business income.” Interested parties are invited to submit comments on the difference between an active versus an investment business by August 31, 2015.

We invite you to read the following pages for an overview of the main measures.


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Gilles Fortin
Lead Senior Director | B.A.A. | Financial advisory

There are multiple reasons for selling a business. For some sellers, age, the approach of retirement, a sudden event such as illness, or simply the desire to do something else, lead them to consider selling their business.

In this context, regardless of the reasons for selling, the process is complex and ideally should be the object of a planned approach. This requires a major investment of time and effort to obtain the best possible price and favour the company’s sustainability.

1. Can I do it alone?

To carry out this process, you must consider several aspects involving specialists, such as business valuators, legal specialists, financiers, tax advisors and specialists in negotiation.

2. What is the value of the business?

Entrepreneurs usually know little about the value of their business. For many of them, the selling price of the business is based on the amount of money they want for their retirement. In this regard, a business valuation should be obtained before engaging in a selling process, so that a good basis for negotiation is established. Not only must the company’s assets be appraised, but its fair market value must be established.

3. What about taxes?

Tax planning related to the transaction is also essential. It needs to be planned methodically, because a shareholder who sells his company’s shares (and not the assets) has the right to a capital gains exemption of up to $800,000, if he meets certain very specific criteria. For entrepreneurs who want to sell their business so they can constitute their retirement fund, this tax benefit becomes especially important.

4. Have you established a communications and marketing strategy?

In the process of selling a business, communication is essential, both with the buyer and with the team in place within the business and the key employees. Is there internal interest, or a risk of losing one or more key employees?

5. Can you control your emotions?

Entrepreneurs often have invested a large part of their lives in the business. They are involved both in human and financial terms. It is therefore completely normal to be emotionally involved when you consider divesting your life’s work.

But there is no place for emotionalism in the process of selling a business. For this reason, support to the seller by a person who has no interest in the business is very beneficial in such transactions.

Just as entrepreneurs are experts in their industry, entrepreneurs involved in a selling process should call on the best resources at their disposal. Ultimately, the wealth he needs to ensure his retirement is in question.

31 Mar 2015  |  Written by :

Gilles Fortin is your expert in corporate finance for the Québec office. Contact him today!

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Eric Dufour
Vice-President, Partner | FCPA, FCA | Business Transformation

Break out the champagne! The Finance Minister is (finally) doing something about the unfair taxation that financially penalized business owners who want to transfer their company to family members, an issue on which Raymond Chabot Grant Thornton has made numerous representations since 2010. Starting in 2017, owners of businesses in primary industries and the manufacturing sector will be benefit from tax fairness when transferring their business to a person with whom they have a non-arm’s length relationship.

Given that more than 70% of Quebec’s SMEs are family-run businesses, the firm has insisted that intergenerational business transfers no longer be fiscally penalized, since this has impeded economic growth. The Finance Minister’s decision is a big step toward tax fairness. However, efforts must continue so that this measure is extended to other sectors and the federal government also takes similar action.

Another significant action for succession contained in the March 26 budget is a $2 million investment per year over the next three years to:

  • extend the business transfer services provided by Centre de transfert d’entreprises du Québec to all regions; and
  • bolster mentoring services in succession by funding the Fondation de l’entrepreneurship’s Réseau M 2.0 project.

We believe it is nonetheless important to support our sellers with just as much attention. This is why we feel there is a need to create a fund to support creators of wealth so they can make use of external professionals in the transfer process and when developing a succession plan. The firm pointed this out to the Finance Minister during the prebudget consultations.

Balanced public finances depend on the totality of business owners who hire, develop, innovate and invest in Quebec. However, this base is being dangerously weakened as Quebec gears up for the biggest change in SME management that it has ever seen.

While the buyers are highly visible and have many tools with which to prepare, the sellers, on the other hand, are less conspicuous. And yet, many studies show that about one-third of business owners will retire in the next five years. Of these, 91% have no formal succession plan.

Why have we fallen so far behind? The answer: business owners have concerns that are making them slow to take action. The situation can be attributed largely to “entrepreneurial mourning”. For entrepreneurs, it is often difficult to step back from the business world. It is not easy to leave the company they founded, built, supported and were fully invested in. They are often very involved in their communities and have concerns about preparing for retirement.

Our leaders want to stay active in their companies, and it is important that they do so in order to ensure the transfer of knowledge, mentoring and a smooth transition. They must also have confidence in the buyers and understand the generational differences that are their strengths. There are obvious human issues that should not be underestimated in the business transfer process. It is no surprise that effective planning takes two to eight years.

Quebec’s Finance Minister will publicly announce the conditions to ensure that the transfer of family business benefit from an exemption in the next year. We hope that the succession plan will be one of the criteria for certifying eligibility.

Raymond Chabot Grant Thornton has helped more than 200 companies develop their succession plan and will continue to be a partner of choice for dynamic companies here in Quebec.

27 Mar 2015  |  Written by :

Éric Dufour is a vice-president at Raymond Chabot Grant Thornton. He is your expert in management...

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