Certain derivatives are excluded from the inventory valuation rules while maintaining the status of such property as inventory resulting a current write-down of the value and recognize the gains at the end of the year.
Section 10 of the Income Tax Act is amended by adding the following after subsection (14):
(15) For the purposes of this section, property of a taxpayer that is a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement, or any similar agreement is deemed not to be inventory of the taxpayer."
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Note: All information relating to derivatives valuation above is available from Government of Canada website.
By Theresa Lo, CPA, CGA
October 11, 2017
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