Would you like to reduce your income taxes? Although tax planning should be a year-long activity, there is still some time left to implement a few tax strategies that will help reduce your tax bill.
Furthermore, certain measures coming into effect as of 2020 should be taken into consideration.
The following are a few simple, effective strategies that can be implemented before the end of 2020 or early 2021. Don’t hesitate to contact your Raymond Chabot Grant Thornton advisor who can help you determine the measures that apply to your situation.
The Grant Thornton International IFRS team has published the 2020 version of IFRS Example Consolidated Financial Statements 2020.
The IFRS Example consolidated financial statements 2020 have been updated to reflect changes in IFRS that are effective for the year ending December 31, 2020. No account has been taken of any new developments published after September 30, 2020.
In addition, given that the global COVID-19 pandemic has impacted virtually every reporting entity that exists, the 2020 version comments on information that might be relevant to disclose around the COVID-19 in the financial statements.
The Example consolidated financial statements are based on the activities and results of the illustrative corporation and its subsidiaries – a fictional consulting, service and retail entity – which have been preparing IFRS financial statements for several years. The form and content of IFRS financial statements depend on the activities and transactions of each reporting entity.
The Grant Thornton International IFRS team’s objective in preparing the Example consolidated financial statements is to illustrate one possible approach to financial reporting by an entity engaging in transactions that are typical across a range of non-specialist sectors. However, as with any example, this illustration does not consider every possible transaction and, therefore, cannot be regarded as comprehensive.
Management, as defined by the International Accounting Standards Board (IASB), is ultimately responsible for the fair presentation of financial statements and, therefore, may find other more appropriate approaches for its specific circumstances.
The pandemic triggered major changes in the way manufacturers manage their operations. What are the key issues?
Manufacturing is an important driver of Quebec’s economy. In 2019, this sector’s gross domestic product (GDP) reached $50 billion, accounting for 14% of the province’s total GDP and 89% of export values.
It was also one of the largest sources of jobs with 433,000 employees—that’s 11.7% of all workers in the province and 28% of all Canadian manufacturing positions. And since these workers’ weekly earnings are 10% higher than the Quebec average, manufacturing jobs are considered quality positions that keep the wheels of the province’s economy turning.
COVID-19 and its impacts on manufacturing
When the pandemic struck last spring, it resulted in serious repercussions on manufacturers around the world.
In Quebec, businesses were forced to halt their operations or slow them considerably during the first wave. This led to a 33% reduction in global exports and the loss of some 44,000 jobs between February and July 2020.
Not all industries within the manufacturing sector were affected equally, however. Each was plagued with its own set of issues.
While some companies were forced to shut down completely, others faced reduced production capacities, supply shortages, import/export bottlenecks due to border closures, and other constraints. The situation was particularly bad for manufacturers who rely on international trade or hard-hit industries like air travel, tourism and entertainment.
In contrast, companies that make essential products saw demand skyrocket and had to accelerate production despite being short on workers and supplies, and the need to navigate strict new health and safety protocols.
Understanding issues before taking action
These new challenges affected production lines in more ways than one.
Supply disruptions and domino effect
When China closed its borders to stop the spread of the virus, it triggered a domino effect across global supply chains. Manufacturing businesses were the first to feel the pinch. For example, many had to contend with a lack of raw materials and seek out new suppliers.
The situation also highlighted the need for manufacturers to strengthen their relationships with suppliers and diversify their partnerships, leading to interesting debates on self-sufficiency and the Buy Local movement.
Managing a company involves juggling multiple variables, such as sales volumes, personnel availability, operational inputs, machine capacity, infrastructure quality, technology potential, etc. Each of these variables has an impact on your ability to achieve your targets.
In order to remain operational during the crisis, companies feeling the squeeze had to analyze their processes to determine which ones were at risk and identify potential solutions to minimize the damage.
Ensuring operational resilience depends on a company’s ability to adapt and strike a balance between dynamic production planning, technology optimization and costing. Implementing these actions can help you control costs and improve operations.
IT data security
Since the beginning of the pandemic, there has been a spike in phishing, ransomware and other cyberattacks on businesses of all sizes, to the point where cybersecurity has become a major concern for all organizations.
And since remote work arrangements are now widespread in certain industries and for certain types of jobs, these types of scams are only expected to become more frequent. In order to protect themselves and their data from cybercriminals, manufacturers need to invest in IT security. With the right solutions, they can keep threats at bay and minimize the impact of breaches.
Improving efficiency through digital transformation
We’ve already seen that the companies that started their digital transformation before the pandemic have been able to adapt better, thanks to process automation, the implementation of remote controls, improved data analysis and the use of artificial intelligence solutions. They’ve been able to remain efficient, achieve better output and take advantage of the situation to set themselves apart from the competition.
Workforce health and safety
Your workforce is your greatest asset. To remain engaged and productive, employees need to feel safe in the workplace. This means having a suitable physical environment and an employer that cares about their physical and mental health.
The pandemic has been hard on workers in the manufacturing industry. Some have seen their workplaces closed while others faced layoffs, reorganized work environments, new health and safety protocols, teleworking and uncertainty about the future. Not to mention the disease that may result from the virus itself.
Companies are rightfully concerned about employee retention and wellbeing. This raises several questions for managers. In this context, it’s important to plan effective and regular communications with employees. You want to keep them informed of any changes and provide them with reassurance.
Cash management has always been a major concern for manufacturing companies, even before the pandemic. But in the past several months, most companies have experienced a significant drop in revenue, which is affecting their working capital.
Businesses need capital to meet their financial obligations, such as payroll, accounts payable, loan repayments and business investments. Carefully assessing the situation is critical for making informed decisions, protecting liquidity and limiting financial impacts over the short, medium and long terms.
Preparing for the new normal
Recent events have turned things upside down and our society is changing. Manufacturers have demonstrated resilience in adapting to the new normal and we’re already seeing evidence that the challenge will leave permanent marks on our ecosystem.
Certain trends observed during the pandemic have increased. Others have emerged and look like they’re here to stay, such as taking a more preventive approach to risk management, shortening supply chains, and striking a balance between buying local and complying with the terms of free trade agreements.
During this discussion with John Parisella, our President, Emilio B. Imbriglio, addressed the stakes of the U.S. election for Canada.
In the wake of the U.S. elections, on November 4th, as part of the Firm’s One-on-One discussions, Emilio B. Imbriglio, President and CEO of Raymond Chabot Grant Thornton, spoke with John Parisella, Senior Advisor, Strategy and Business Outreach at NATIONAL Public Relations and a leading expert on American politics.
Although the outcome of the elections was still uncertain, particularly for the presidency and the Senate, the observations of the former chief of staff for Robert Bourassa and Daniel Johnson and Quebec’s delegate general in New York City highlighted U.S. policy trends that are likely to emerge. Here is a brief overview of the discussion between the two leaders.
Realistic and optimistic approach
From the outset, John Parisella made a point of stating that his analysis is intended to be both realistic and optimistic. The United States is not the same country of the 1960s, where there were many more divisions, particularly in the areas of civil rights and nuclear confrontation.
John Parisella said: “You might have thought it was the beginning of the end for the country, but the U.S. kept going,” adding that in the ensuing years, the U.S. showed strong leadership on a global scale.
Despite the fact that the results were still pending and would be close, especially in the upper house (Senate) where the Republicans could retain a majority, albeit smaller, Parisella stressed that it will be a transitional presidency, regardless of who is elected.
In his opinion, because of the respective ages of the presidential candidates and the 2022 mid-term elections when the House of Representatives and one third of the Senate will be renewed, a completely different dynamic could be taking place in both parties. “The U.S. will already be in a new election cycle as of 2022,” he said.
Given the issue of mistrust about possible electoral fraud, John Parisella indicated that while there are no historical references, possible interference is not ruled out—for example, via the Internet from foreign governments such as Iran, China or Russia. Nevertheless, John Parisella is confident that the electoral system is well organized. “There are 50 separate elections and each state has its own voting system. […] There may be irregularities, but that’s not proven.”
Mr. Imbriglio asked Mr. Parisella how he envisioned the system of checks and balances. According to John Parisella, the issue of checks and balances applies to institutions, but it also belongs to civil society, which is very active on this front.
“Remember when the President withdrew from the Paris Accord, several states had ongoing climate change initiatives that did not require such an agreement to be carried out. Even some Republican governors are much more open to environmental dialogue than Mr. Trump is,” the expert stated, adding that the media should not be neglected in all of this either, because they make a significant contribution.
Economic and trade impacts for Quebec and Canada
With respect specifically to Canada-U.S. relations, the Firm’s President asked John Parisella about his views after four years of the Trump presidency. Considering that Quebec and Canada are competing with several other states for market share in the United States, Mr. Imbriglio highlighted the United States-Mexico-Canada Agreement (USMCA) and raised the U.S. President’s tax reform, which cancelled out Canada’s corporate tax advantage.
In a word, according to John Parisella, they’re complicated. He added that changes will take place in the economy, especially with the new USMCA. “Yes, we had to make concessions, but it should be noted that the former North American Free Trade Agreement (NAFTA) was concluded before the advent of the Internet. […] We retained what we achieved, saved a lot of what we had and signed the new agreement, with a cross-Canada consensus.”
According to John Parisella, post-COVID economies will face a recovery with different policies than before the pandemic and this will have to be dealt with. “That’s why I use the terms trade diplomacy and economic diplomacy a lot.” Parisella also noted that 70% of Quebec’s exports go to the U.S., something that won’t change.
“You have to be in a constant state of diplomacy, and that’s not just between the White House and the federal government, but between provinces, cities, chambers of commerce, unions, business sectors,” he said. He went on to point out that Quebec is the only province that has as many representatives globally, in 18 countries with 33 representations, including nine in the United States, and that would not change, regardless of who’s in the Oval Office.
In short, even though the results of American elections were not known at the time of the two leaders’ virtual meeting, Parisella expressed optimism about the future of Canada-U.S. relations. “The United States is a highly imperfect democracy […] but a country with which we share prosperity, democratic values and security objectives.”
This dynamic and informative exchange between Emilio B. Imbriglio and John Parisella clearly demonstrated that the strong relationship between the two countries will continue. Thank you, Mr. Parisella, for your insightful, candid and optimistic observations!