An eligible entity whose normal accounting practice is to convert the inflow of cash, receivables, and other consideration into Canadian currency from a foreign currency, also adjusts various FX-denominated balances on its balance sheet date to reflect their value in Canadian currency on that date. Should such adjustments be included in qualifying revenue? Or should only realized foreign exchange gain or loss arising in the course of the ordinary activities of the eligible entity—generally from the sale of goods, the rendering of services and the use by others of resources of the eligible entity—be so included?
In responding “no” to the first question, CRA stated:
[Q]ualifying revenue requires, among other things, an inflow of cash, receivables or other consideration. Where an entity re-evaluates or translates certain balance sheet accounts to reflect their value in Canadian currency at a certain time, no inflow of cash, receivables or other consideration has occurred.
Respecting the second question, it stated:
[D]epending on the facts of the situation, a realized foreign exchange gain or loss arising from an entity’s ordinary activities in Canada, that is determined in accordance with the entity’s normal accounting practice, may be considered qualifying revenue for the entity. For example, if an entity realizes a foreign exchange gain on the collection of an account receivable that arose on the sale of goods, the realized gain may be included in the entity’s qualifying revenue.