Books and records guidance

Since mandatory adoption of International Financial Reporting Standards (IFRS) started in Canada in 2011, publicly accountable enterprises (PAEs) have to measure, value, and present financial statements differently from those prepared under Canadian generally accepted accounting principles (GAAP) in earlier years. Other qualifying enterprises have the option to also adopt IFRS for financial statement preparation.

To integrate IFRS and the requirements of the Canadian Income Tax Act and Excise Tax Act, PAEs and other qualifying enterprises are required to maintain, on a legal entity and/or partnership basis, additional documentation to support the income tax and GST/HST tax returns filed with the Canada Revenue Agency (CRA).

This documentation must be maintained at the same location where the enterprise maintains its records. All of the records and supporting documents must be kept for a period of six years, which starts at the end of the tax year to which the records relate. Records and supporting documents concerning long-term acquisitions and disposal of property, the share registry, and other historical information that would have an impact upon sale, liquidation or wind-up of the business must be kept indefinitely.

The purpose of the following guidance is to address the additional documentation that qualifying enterprises are expected to maintain to support amounts filed on their General Index of Financial Information (GIFI) and tax returns.

This guidance should be read in addition to our information on Keeping records and Preparing your financial statements using General Index of Financial Information (GIFI).

Minimum records to be maintained

The information below outlines key documentation that will be necessary to support the tax obligations of an enterprise.

Reconciliations

Financial statements

Reconciliations from both:

  • the amounts recorded on the GIFI to the IFRS financial statements
  • the IFRS financial statements to the financial records (including those that are not maintained using IFRS)

First time adoption of IFRS

For the first tax year when IFRS is adopted, the CRA requires a Reconciliation of Equity from previous Canadian GAAP to IFRS at the date of transition to IFRS and the end of the previous tax year as described in paragraphs 23 to 26 of the IFRS manual.

Example

If IFRS is adopted for the tax year ending December 31, 2017, the taxpayer should maintain a Reconciliation of Equity from Canadian GAAP to IFRS as at January 1, 2016 (date of transition) as well as at December 31, 2016 (end of the previous tax year).

This reconciliation should also include an explanation of the adjustments to retained earnings.

Schedules

Schedule 1, Net Income or Loss for Tax Purposes

Support for each separate IFRS reconciling amount adjusted in the calculation of income or loss for tax purposes. This would include any transitional adjustment reflected on Schedule 1.

Rationale for income inclusions or deductions taken to comply with the Income Tax Act, including the tracking of fair value or impairment adjustments.

All depreciable and non-depreciable capital assets –
Schedule 8, Capital Cost Allowance (CCA)
Schedule 10, Cumulative Eligible Capital Deduction

Records of the original cost as well as tax cost for all assets and liabilities, including financial instruments.

Although required on an ongoing basis for income tax and GST/HST purposes, this is a key documentation requirement when enterprise financial records are maintained using fair values, impaired values (decrease of its value) or revaluation amounts under IFRS.

Reconciliations between capital additions as reported for GST/HST or income tax purposes and those presented on IFRS financial statements or financial records, including a detailed breakdown of those assets included under each CCA class. Assets include both tangible and intangible assets.

System changes related to IFRS

Documentation to support system changes required on adoption of IFRS. Adequate documentation must be retained to preserve an accurate record of the changes, including any changes to software or systems and the format of the files.

For more information, see information circular IC05-1R1, Electronic Record Keeping, and Keeping Records.

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