Adviser alert – May 2018

The Grant Thornton International IFRS team has published IFRS Viewpoint – Accounting for cryptocurrencies – the basics.

The IFRS Viewpoint series provides insights on applying IFRS in challenging situations. Each edition will focus on an area where the standards have proved difficult to apply or lack guidance.

This edition provides guidance on some of the basic issues encountered in accounting for cryptocurrencies, focusing on the accounting for the holder. A future IFRS Viewpoint will explore other more complex issues, such as those relating specifically to cryptocurrency miners.

The issue

The popularity of cryptocurrencies has soared in recent years, yet they do not fit easily within IFRS’ financial reporting structure. For example, an approach of accounting for holdings of cryptocurrencies at fair value through profit or loss may seem intuitive but is incompatible with the requirements of IFRS in most circumstances. This IFRS Viewpoint explores the acceptable methods of accounting for holdings in cryptocurrencies while touching upon other issues that may be encountered.

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Jean Chiasson
Partner | CPA, CIRP

The “Central and Critical” Role of the Chartered Insolvency and Restructuring Professional (CIRP) In the recovery of a struggling business

Personally, I think our professional lives are exciting because of the challenges that a Chartered Insolvency and Restructuring Professional (CIRP) faces in the financial rehabilitation of individuals and companies. As well, our profession is constantly evolving with changes in insolvency regulations and with the rhythm of economic cycles.

Canada has almost 1,000 active CIRPs (almost all of them are also Licensed Insolvency Trustees) and about 350 articling associates. Many of us practice exclusively in one sector: either business bankruptcies or consumer bankruptcies.

In this regard, the portrait of the statutory component of our practice (mainly files under the Bankruptcy and Insolvency Act) has changed considerably over the last 10 years (in the 2007–2016 period).

Consumer insolvency files saw a 25% increase in 10 years and are keeping our members and our articling associates busier than ever.

On the other hand, statutory business files fell by 50% (54% fewer bankruptcies and 27% fewer proposals). It is interesting to observe that the number of consumer files had a sudden and significant increase following the economic recession of 2008–2009 and during the flurry of legislative changes at the same time, but that the “steady and consistent” decline in the number of statutory business files did not seem to be affected by this period of economic downturn, nor by other important economic factors that Canada has experienced since 2010, such as a slowdown in the resource sector and strong variation in the exchange rate.

Canadian SME’s recovery

My practice — almost 25 years of business recovery (rarely in a statutory context) — has allowed me to note specific elements that help to explain the marked and steady decline in statutory files for small and medium-sized Canadian enterprises (the following list is not exhaustive):

  • Businesses have greatly improved their finance function. Both the competencies of chief financial officers and the management tools have greatly evolved — efficient accounting systems, relevant information management and budget planning;
  • Financial institutions (particularly short-term secured lenders) have improved their risk management and their methods of follow-up and intervention;
  • The use of forms of electronic payment (including external payroll services) makes it more difficult to “unduly and covertly” increase arrears with suppliers and government agencies; and
  • The costs of statutory restructuring are significant.

All of these elements are leading entrepreneurs and their financial partners to react “more quickly” in the context of a business’s deteriorating profitability and financial situation. As well, by removing up to six months from the process of rationalizing expenses, abandoning an unprofitable product or service, or closing a division or subsidiary that is running a deficit, a company’s management is often able to avoid bankruptcy or the need for statutory restructuring.

In practice, we note that no matter why or how we were hired (by the company, by a secured lender or by an institutional investor), all the financial partners are “listening” to the analyses and observations of the CIRP.

Involvement of licensed insolvency trustees

Superintendent of Bankruptcy (OSB) statistics do not allow for the measurement of the involvement of licensed insolvency trustees (or CIRPs) in “non-statutory” restructurings of companies in all Canadian regions. Indeed, a company is not going to broadcast that has avoided bankruptcy with the help of a CIRP, except among a very close circle of contacts!

In reality, CIRPs are still being asked by companies or companies’ financial partners to assess a worrying financial situation. In such situations our expertise and our credibility come into play, and this includes:

  • An immediate intervention. This is no small matter: intervention by a CIRP is quick and serious;
  • A relevant analysis of the situation because of the CIRP’s experience and credibility in business and finance and understanding of the foreseeable consequences of a precarious situation;
  • A cash-flow assessment and the development of very short-term projections (12- to 16-week cash projections). This helps short-term secured creditors be patient and participate positively in the recovery process;
  • A recovery plan that takes into account priorities and includes immediate measures and actions; and
  • A clear vision enabled by the preparation of financial forecasts for the coming year, which will make it possible to identify the contributions from the shareholders (or others), to specify the support needs of lenders and to regularly monitor the achievement and evolution of recovery measures in the coming months.

In practice, we note that no matter why or how we were hired (by the company, by a secured lender or by an institutional investor), all the financial partners are “listening” to the analyses and observations of the CIRP, even as they understand that the CIRP’s more specific recommendations will be reserved for his or her client.

Therefore, certain elements are necessary to avoid slippage at the beginning of a CIRP’s intervention:

  • A CIRP’s reputation in his or her community for his or her ability to work as part of a team and to bring about a company’s recovery either with or without statutory restructuring;
  • A pre-established method of communication for all stakeholders while considering the disclosure limits of the CIRP’s mandate;
  • Specified deadlines for the initial analysis period and the follow-up of the company and the CIRP with the financial partners involved; and
  • The involvement “sooner rather than later” of an “extended” group of financial partners to allow a representative to be designated for each partner and for the recovering company’s file to be treated quickly and as a priority when decisions are being made.

No matter the trends for their future “statutory” insolvency files, the CIRPs’ role in Canada in business recoveries will remain predominant and continue to evolve in the years to come.

This article was published in Rebuilding Sucess Magazine, Spring-Summer 2018.

28 May 2018  |  Written by :

Jean Chiasson is a partner at Raymond Chabot Grant Thornton. He is your expert in Recovery and...

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Denis Brisebois
Vice President | Tourism-Leisure-Culture | Management consulting

Culture is a strong asset when used as a social and economic development tool. This inspiring topic has been widely documented. The many papers resulting from cultural policies or Agenda 21 for culture are particularly very explicit in this regard.

Nevertheless, our long practice as consultants lead us to broaden this thought process and present you with another perspective on territory attractiveness in relation to culture, leisure and sports.

We propose five measures for you to consider and define what actions to take to enhance your territory’s attractiveness.

These points rely on three findings:

  1. Today’s citizens are many, complex, ever-changing and constantly moving: demographic changes, fragmented lifestyles, new cultural communities, etc.
  2. Territory attractiveness is a team sport! No sector (sport, culture, urban planning, economic development, etc.), investment strategy, or asset (land, transportation infrastructures, etc.) can boast being able to increase a territory’s attractiveness all on its own.
  3. Municipal organizations, through their regulatory framework, are generally rather rigid organizations. What’s more, several factors lead them to develop in isolation, even when collaboration is implicitly encouraged.

With these premises in mind, we present, for your consideration, five measures to make your territory more attractive and retain your citizens and businesses.

These five measures are as follows:

1. Understanding the present and outlining the future

Today more than ever, our lifestyles are constantly changing: the profile, composition and lifestyle of our populations are in ferment. At the same time, never has there been as much information and so many tools available for obtaining a fair, real-time understanding of our populations’ needs, satisfactions and expectations. Municipal managers must keep a veritable scoreboard to properly monitor, or even get more ahead of, the parade!

2. Acting together

Having a wealth of information, regardless of how relevant, does not always guarantee success. There is a strong risk of getting overwhelmed and the challenge of translating this information into action is vital. There are three key factors to consider: Have a clear vision and positioning that are shared with the parties involved, have a well-scripted scenario (strategic planning) and, lastly, know how to integrate innovation into the processes and strategies.

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3. Mobilizing all players

The key to successful territorial attractiveness strategies rests on the engagement of the parties involved (organizations, institutions, citizens, businesses, etc.) and their being in line with the vision. There are many interesting ways to increase engagement in the municipal arena. We’ve noted the growing desire to implement these new approaches. Nevertheless, we will have to make sure that there’s substance behind the glossy packaging with regard to these new citizen approaches. Furthermore, a fair amount of energy will be needed to engage the silent majorities (citizens or businesses).

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4. Reinventing public spaces

One of the most important measures concerns equipment and infrastructures, because they are at the heart of our communities’ vitality. We believe there is a need to reinvent how we plan and design public, or even private, spaces and infrastructures. Given the significant amounts invested in this regard, we must ensure that added value is created for each investment. The vitality and dynamism of each community will strongly depend on how decision-makers interpret this measure. A large number of successes, but also failures, will have to be studied so that we can find the best.

5. Making the territory come alive

In our practice, we find that, historically, municipal managers (in leisure and culture) have had an approach that is limited to managing infrastructures (arenas, libraries, sports fields, etc.) and programs (day camps, cultural activities, etc.). Our observations lead us to design a new approach, one where they become true “territory facilitators” rather than equipment and program managers, and change our way of doing things. This shift is happening here and there, but it’s still only in the beginning phase.

In conclusion, we invite municipal players to ask themselves: “Are we well positioned for each of these measures?” If so, there is a good chance that your territory will come out on top in terms of attractiveness and retaining your various clients. However, if the answer is no, in order to move in the right direction, you will have to implement specific actions for each of these measures.

This article appeared in Le Sablier, published by the Association des directeurs généraux des municipalités du Québec.

18 May 2018  |  Written by :

Denis Brisebois is a management consulting expert and leader in tourism, leisure and culture....

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Updated on May 4, 2023

Did you know that an individual inheriting a building could have to pay GST and QST upon receiving the inherited property?

In fact, the transmission of estate property to heirs constitutes a sale and as a result, can be subject to the Goods and Services Sales Tax (GST) and the Québec Sales Tax (QST). Therefore, when transmitting a commercial building, the estate (i.e. the seller) will have to collect and remit GST and QST.

There are exceptions

There are however situations where the estate does not have to collect sales tax. For example, when the heir (or acquirer) is registered for GST and QST, the estate is not required to collect taxes that are otherwise applicable.

Before transmitting estate property, make sure you properly understand your obligations and comply with commodity tax rules.

The Raymond Chabot Grant Thornton’s tax advisors can guide you in this type of tax planning. Contact our professionals for assistance with this process.

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