Before going on to find that the taxpayer was specifically required by s. 181(3) to treat retractable preferred shares in its capital as debt, given that the shares were treated as debt for accounting purposes, Bowman C.J. noted that, in the absence of s. 181(3), the legal substance of the preferred shares as equity rather than debt would have been respected (pp. 3428-3429:
"Generally speaking the Canadian courts in tax matters show low deference to GAAP ... we are not, in Part I.3 dealing with the computation of income, a function that courts have jealously guarded to themselves."