In rejecting a submission of the taxpayer that foreign exchange losses on U.S. borrowings of the taxpayer were on income account because those U.S. dollar borrowings were hedged by a stream of U.S.-dollar revenues of the taxpayer, Woods J. stated (at para. 74):
The principle that a foreign exchange gain or loss on indebtedness takes its character from the character of the indebtedness has been followed in a long line of jurisprudence in this country and in the United Kingdom.
In the Court of Appeal, Evans JA stated (at para. 34):
The attribution of foreign exchange gains or losses on income account for tax purposes when income transactions are hedged by derivative contracts is an inadequate basis for extending them to commercially independent transactions and thereby departing from the well-accepted principle that foreign exchange losses on the repayment of a loan take their character from that of the loan itself.