In Yorkwest Plumbing Supply Inc. v R, 2020 TCC 122, the Court considered an adjustment of $1.2 million that the taxpayer had made to its 2012 net income in respect of inventory that had been purchased and sold before the year but whose cost had not been accounted for properly in the prior years (which resulted in an overstatement of income in those years). The Court held that an adjustment could not be made in 2012, although it was (according to an expert witness) in accordance with GAAP because of the wording of the Income Tax Act (Canada) and the case law interpreting it. Result: windfall for the Crown upheld!
Philip Friedlan and Adam Friedlan “Valuing Inventory: Legal Analysis Overrules GAAP” Tax for the Owner-Manager 21:2 (April 2021)
