Éric Brosseau
Senior Manager | Ing., LL.M. | Tax

The Canada Revenue Agency (CRA) has made known its intention to step up its presence with taxpayers who conduct scientific research and experimental development (SR&ED) activities. This involvement usually takes the form of an accounting and scientific audit.

In principle, there should not have been any changes to the program. However, we’ve currently noted that a new approach is being taken with respect to the interpretation of the program, the file analysis process and reliance on contemporaneous evidence.

In this context, your SR&ED tax credit claims risk being significantly reduced by the CRA if you are unable to clearly defend your case. So what do you do if the CRA informs you that it will be auditing your file (which means that the CRA considers certain aspects of your claim as being unacceptable)?

Your first step is to question the government agents in order to get a firm handle on the points that they would like to verify. Will their audit focus exclusively on financial data? Which of your technical projects do they want to discuss? Ideally, you should receive a written response to these questions.

Usually, the CRA provides a list of the information that you will be required to produce. We recommend that you promptly reply to the CRA’s demands. If you don’t have the information in the format required by the CRA, contact them immediately to discuss the matter further.

When preparing for an audit, you should consider the points raised by the CRA. It is imperative for you to be able to properly state your case concerning your claim. If you haven’t already done so, you must see to it that you still have at hand the contemporaneous documentation that was produced during your tests, which can easily be accessed for reference during the audit. Also, you may want to re-read the technical descriptions that were submitted along with your income tax returns.

When the day of the audit arrives, stay calm! Answer the questions and try to obtain the opinion of the government agents before the meeting ends. If it isn’t possible for you to obtain this opinion, ask when you can expect to receive it.

Do not hesitate to contact us for more information about the SR&ED tax credit program.

27 Oct 2010  |  Written by :

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These various publications address International Financial Reporting Standards (IFRSs) and are designed to keep you apprised of new and topical issues that may be relevant to your enterprise’s IFRS transition process.

We have pleasure in enclosing Deferred tax – A Chief Financial Officer’s guide to avoiding the pitfalls, an application guide by the IFRS team at Grant Thornton International Ltd.

International Financial Reporting Standards (IFRS) IAS 12, Income Taxes (IAS 12) is not new. However, for many finance executives, the concepts underlying the computation of deferred tax are not intuitive. IAS 12 takes a mechanistic approach to the computation but also requires significant judgement in some areas. Also, applying the concepts of IAS 12 requires a thorough knowledge of the relevant tax laws. For all these reasons, many Chief Financial Officers (CFOs) find the calculation of a deferred tax provision causes significant practical difficulties.

The guide is intended for CFOs of businesses that prepare financial statements under IFRS. It illustrates
IAS 12’s approach to the calculation of deferred tax but is not intended to explain every aspect of the standard in detail.

Rather, it summarizes the approach to calculating the deferred tax provision in order to help CFOs prioritize and identify key issues. To assist CFOs with these application issues, the guide also includes interpretational guidance in certain problematic areas of the deferred tax calculation.

To view this publication, click on the “Download” button on the right.

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We have pleasure in enclosing Financial Instruments on Display – Illustrative Disclosures and Guidance on IFRS 7, an application guide by the IFRS team at Grant Thornton International Ltd (Grant Thornton International).

International Financial Reporting Standard IFRS 7, Financial Instruments: Disclosures (IFRS 7), is not new – it came into effect for annual periods beginning on or after January 1, 2007. Nonetheless we think this guide can be very useful.

To view this publication, click on the “Download” button on the right.

 

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These various publications address International Financial Reporting Standards (IFRSs) and are designed to keep you apprised of new and topical issues that may be relevant to your enterprise’s IFRS transition process.

The Road to Conversion

In March 2007, the International Accounting Standards Board issued a revised version of the International
Financial Reporting Standard IAS 23, Borrowing Costs. This revised version becomes mandatory for annual periods beginning on or after January 1, 2009.

The former version of IAS 23 allowed entities to choose between capitalizing borrowing costs directly
attributable to the acquisition, construction or production of qualifying assets as part of the cost of these assets, or expensing these costs. The revised version of IAS 23 eliminated this choice by requiring the capitalization of all borrowing costs directly attributable to the acquisition, construction or production of qualifying assets as part of the cost of these assets.

To view this publication, click on the “Download” button on the right.