Financial reporting and accounting advisory services
You trust your external auditor to deliver not only a high-quality, independent audit of your financial statements but to provide a range of support, including assessing material risks, evaluating internal controls and raising awareness around new and amended accounting standards.
Accounting Standards for Private Enterprises
Get the clear financial picture you need with the accounting standards team at Grant Thornton LLP. Our experts have extensive experience with private enterprises of all sizes in all industries, an in-depth knowledge of today’s accounting standards, and are directly involved in the standard-setting process.
International Financial Reporting Standards
Whether you are already using IFRS or considering a transition to this global framework, Grant Thornton LLP’s accounting standards team is here to help.
Accounting Standards for Not-for-Profit Organizations
From small, community organizations to large, national charities, you can count on Grant Thornton LLP’s accounting standards team for in-depth knowledge and trusted advice.
Public Sector Accounting Standards
Working for a public-sector organization comes with a unique set of requirements for accounting and financial reporting. Grant Thornton LLP’s accounting standards team has the practical, public-sector experience and in-depth knowledge you need.
Tax planning and compliance
Whether you are a private or public organization, your goal is to manage the critical aspects of tax compliance, and achieve the most effective results. At Grant Thornton, we focus on delivering relevant advice, and providing an integrated planning approach to help you fulfill compliance obligations.
Research & development, government incentives
Are you developing innovative processes or products, undertaking experimentation or solving technological problems? If so, you may qualify to claim SR&ED tax credits. This Canadian federal government initiative is designed to encourage and support innovation in Canada. Our R&D professionals are a highly-trained, diverse team of practitioners that are engineers, scientists and specialized accountants.
Keeping track of changes and developments in GST/HST, Quebec sales tax and other provincial sales taxes across Canada, can be a full-time job. The consequences for failing to adequately manage your organization’s sales tax obligations can be significant - from assessments, to forgone recoveries and cash flow implications, to customer or reputational risk.
Global mobility services
In today’s competitive and global marketplace, your employee mobility strategy is a critical factor for success. International opportunities are key to attracting top talent and instilling a global mindset across your organization. Your people truly are your most valuable asset, and as your expatriate workforce continues to grow, a seamless global mobility program is essential to achieving your overall business goals.
US corporate tax
The United States has a very complex and regulated tax environment, that may undergo significant changes. Cross-border tax issues could become even more challenging for Canadian businesses looking for growth and prosperity in the biggest economy in the world.
US personal tax
Whether your business is only beginning to sell to US customers, or US customers represent the core of your business, anticipating and dealing knowledgeably with the US tax environment is critical to your bottom line. Our full-service US corporate tax group can help in all tax aspects of doing business in the US. Given high US corporate tax rates, don't be surprised by a US tax liability only to find out that there were planning opportunities available to reduce it.
While there is great opportunity for businesses looking to expand globally, organizations are under increasing tax scrutiny. Regardless of your company’s size and level of international involvement—whether you’re working abroad, investing, buying and selling, borrowing or manufacturing—doing business beyond Canada’s borders comes with its fair share of tax risks.
Transfer pricing is a complex area of corporate taxation that is concerned with the intra-group pricing of goods, services, intangibles, and financial instruments. Transfer pricing has become a critical governance issue for companies, tax authorities and policy makers, and represents a principal risk area for multinationals.
Succession & estate planning
Like many private business owners today, you’ve spent your career building and running your business successfully. Now you’re faced with deciding on a successor—a successor who may or may not want your direct involvement and share your vision.
Tax Reporting & Advisory
The financial and tax reporting obligations of public markets and global tax authorities take significant resources and investment to manage. This requires calculating global tax provision estimates under US GAAP, IFRS, and other frameworks, and reconciling this reporting with tax compliance obligations.
Our transactions group takes a client-centric, integrated approach, focused on helping you make and implement the best financial strategies. We offer meaningful, actionable and holistic advice to allow you to create value, manage risks and seize opportunities. It’s what we do best: help great organizations like yours grow and thrive.
We bring a wide range of services to both individuals and businesses – including shareholders, executives, directors, lenders, creditors and other advisors who are dealing with a corporation experiencing financial challenges.
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Running a business is challenging and you need advice you can rely on at anytime you need it. Our team dives deep into your issues, looking holistically at your organization to understand your people, processes, and systems needs at the root of your pain points. The intersection of these three things is critical to develop the solutions you need today.
Updates for creditors, limited partners, investors and shareholders.
Builders And Developers
Every real estate project starts with a vision. We help builders and developers solidify that vision, transform it into reality, and create value.
Rental Property Owners And Occupiers
In today’s economic climate, it’s more important than ever to have a strong advisory partner on your side.
Real Estate Service Providers
Your company plays a key role in the success of landlords, investors and owners, but who is doing the same for you?
There’s no business quite like mining. It’s volatile, risky and complex – but the potential pay-off is huge. You’re not afraid of a challenge: the key is finding the right balance between risk and reward. Whether you’re a junior prospector, a senior producer, or somewhere in between, we’ll work with you to explore, discover and extract value at every stage of the mining process.
Oil & gas
The oil and gas industry is facing many complex challenges, beyond the price of oil. These include environmental issues, access to markets, growing competition from alternative energy sources and international markets, and a rapidly changing regulatory landscape, to name but a few.
Spotlight on Financial Reporting
COVID-19 has had a tremendous impact on Canada’s business landscape. The federal government announced a number of measures to help Canadian businesses alleviate cash flow and defer tax payments, while companies are mobilizing to rationalize costs, monetize assets and utilize cash surpluses to bridge their cash flow needs. Globally, governments have taken similar measures, most notably in the US, with Congress passing an historic $2 trillion-dollar stimulus, inclusive of numerous corporate tax measures. The speed of change has not given finance teams opportunity to determine the resulting financial reporting and compliance implications.
This article outlines key areas of your tax provision that could be affected by the impacts of COVID-19 and related tax stimulus and should be considered when preparing your 2020 tax provision for financial reporting purposes under IAS 12 Income Taxes (IAS 12). These issues may be applicable as early as Q1 for December 31 fiscal year ends.
Recognition of deferred tax assets
For established business with a long history of profitability, deferred tax assets are often recognized without debate for deductible temporary differences. For many companies, however, deferred tax assets are recognized for non-capital losses, but only when supported by convincing evidence of future taxable profit as outlined in IAS 12.35. When it is no longer probable that future taxable profit will be available, the corresponding deferred tax asset can no longer be recognized under IAS 12.
With the Canadian unemployment rate expected to hit 10% as quickly as Q2 2020, some entities will be significantly challenged to support their profitability assumptions. Further complications can also exist for companies with limited working capital reserves that may now be facing going concern challenges. While Canadian corporate taxpayers can carry net operating losses forward 20 years, companies may be challenged by regulators, auditors and others when projections of profitability exceed five years.
Deferred tax liabilities associated with investment in subsidiaries
For many companies with foreign subsidiaries, accumulated foreign profit is reinvested in overseas operations or used to finance further global expansion. All the while, deferring withholding tax on distribution, should these earnings be repatriated to Canada through a dividend. When dividends are eventually paid, they are often received by the Canadian taxpayer with a full dividend deduction provided they are paid out of active business earnings of the foreign subsidiary. There are certain instances when these dividends are subject to corporate level tax in Canada. IAS 12.39 does not require the recognition of deferred tax liabilities associated with these “outside basis differences” so long as management has control over the disbursement of funds, and it is probable that these funds will not be repaid within the foreseeable future. With the COVID-19 pandemic, many reporting issuers are modelling possible contingency plans that may require funding future deficits associated with the resulting economic downturn. These plans may incorporate cash repatriation to Canada that could result in a corresponding tax liability. Depending on the implications of COVID-19 to your business, management should be assessing whether the deferred tax liability associated with these “outside basis differences” should now be recognized in the company’s financial statements.
Expected manner of reversal
Under IAS 12.51, taxable and deductible temporary differences are required to be measured using the rates at which these differences are expected to reverse. Often, the relevant rate is the general corporate income tax rate applicable to the profit of the entity. In some jurisdictions including Canada, however, the tax rates which apply to gains and losses on the disposition of property are different from these general rates. Business rationalization may be an inevitable fallout of COVID-19, which could alter the composition of existing temporary differences as well as the way those temporary differences reverse. This could result in a change in the appropriate tax rate used to measure certain components of deferred tax.
Interim reporting- effective tax rate
IAS 34 Interim Financial Reporting, paragraph 30(c), requires the use of the so called “effective tax rate method” or “ETR method” as the most appropriate depiction of a reporting issuer’s tax provision on a quarterly basis. The ETR method uses the weighted average annual expected income tax rate (ETR) and applies this to the pre-tax income of the interim period. The logic being that in the normal course, companies are taxed based on their annual income, which encompasses the activity of an annual fiscal period (all quarters of a year) and not the activity of one specific quarter. Absent significant uncertainty, a projected effective tax rate should be a reasonable approximation of an annual tax rate.
With COVID-19 and the existing uncertainty as to when global economies will begin to recover, coupled with various government support and incentives that are being announced daily with the administration of the programs not yet finalized, it may be difficult to demonstrate that a reliable estimate of the annual tax rate can be made using the ETR. Furthermore, the composition of taxable income could be highly uncertain as a result of the government programs.
As reporting issuers look to record their income tax accrual for their quarters during fiscal 2020, consideration should be given to whether the continued use of the ETR method is a reasonable approach to reporting income taxes on an interim basis. If a reasonable estimate of the ETR cannot be made, reporting issuers may wish to consider a year-to-date actual tax calculation as the best estimate of the ETR. IAS 34 in general, requires anticipated tax credits and benefits, related to a one-off event are recognized in the interim period in which they are anticipated to be received. This requirement may further complicate the ability to derive a reasonable ETR.
Some additional areas that companies should consider are:
- Receipt of Government Assistance: whether any government assistance received is within the scope of IAS 12 or IAS 20 Accounting for government grants and disclosure of government assistance
- Changes to tax law: certain governments have adopted tax reforms as a means of supporting business in 2020 potentially affecting substantially enacted tax rates and/or realization of deductible temporary differences
- Global tax planning arrangements: companies may be engaging in global tax planning arrangements to take advantage of the various government tax reforms and incentives related to COVID-19. Those tax planning strategies may need to be considered when preparing the 2020 quarterly tax provisions.
The items covered in this article are potential impacts that that the COVID-19 crisis might have on your income tax provision. This list is not exhaustive. The situation is fluid and government response around the globe is continuously changing.
We are here to help
We understand that you want to be agile and responsive as the situation unfolds. Having access to experts, insights and accurate information as quickly as possible is critical—but your resources may be stretched at this time.
We’re here to support you as you navigate through the impacts of coronavirus on your business and your investments.