| 24(1) | 900025 |
| F.B. Fontaine | |
| (613) 957-2095 | |
| Attention: 19(1) | EACC9437 |
July 13, 1990
Dear Sirs:
This is in reply to your letter dated January 30, 1990 concerning the use of the "completion method" for tax purposes and the "progress method" for financial statement purposes by a taxpayer. We apologize for the delay in responding.
As indicated in Interpretation Bulletin, IT-92R2, the progress method should normally be used in reporting income by a contractor for tax purposes, from all contracts including fixed-total-price contracts, in accordance with the general rules described in the Bulletin.
The completion method is a permissive practice accepted by the Department for mutual convenience only. Among other rules stated in the Bulletin, the completion method is used for reporting income only in respect of all fixed-total-price contracts that are expected to be completed within two years of their commencement (short-term contracts"). This is so, even if progress billings are also rendered in respect of these short-term contracts.
Provided that the taxpayer is a contractor as described in the Bulletin and has always reported income from short-term contracts in accordance with the completion method, it would be acceptable to the Department if the taxpayer used the completion method in respect of such contracts for tax purposes and used the progress method for financial statement purposes.
The above comments are expressed as an opinion only and should not be construed as a binding advance ruling issued by the Department.
Yours truly,
for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch