Posted by & filed under Canadian Economy, Taxation & Planning.

Tapping into opportunities for the students of tomorrow:

Benefits of the RESP

Under the program, both subscriber and government contributions can grow tax-free until the funds are withdrawn to attend an accredited post-secondary institution. Many employers  recognize a post-secondary education (PSE) as a pre-requisite when hiring. Specialized educational achievements are seen as indicators of a candidate’s ability to perform at a high level not only on the job, but also to successfully navigate the challenges of dynamic, modern workplaces.

Increasing cost of education

From 1989 to 2009 tuition fees in Canada more than doubled causing the levels of student borrowing and associated debt to increase.

Existing barriers

Despite the numerous benefits offered by the RESP, many households are not taking advantage of this option. Unawareness of the RESP and the complexity of its definitions and processes were found to be factors for RESP enrolment complacency, especially for the low and middle income demographic.

Low Income Families

It is widely accepted that economically disadvantaged students in Canada are less likely to pursue a university education than students from well-to-do families. While the level of a household’s income may pose a barrier for a student to attend a post-secondary institution, the current financial crisis further hinders a family from saving for PSE through RESPs.

Student Loans

Student loans remain the primary source of funding for costs associated with PSE such as living expenses, tuition and textbooks. In 2008, the average student debt upon graduation increased to $15,466 from $11,250 in 2000. While students may still need to rely on loans, bursaries and scholarships to finance their PSE, RESPs can make a significant impact and reduce the level of overall student debt.

Raise Awareness to the Benefits of RESP’s

Collaboration between financial institutions and group scholarship providers, who can communicate the benefits of RESPs, may be one way to raise awareness and encourage greater participation.

To obtain more information read the complete,Article from the CGA magazine:

Discussion Questions:

1. Why are Youth from Lower-income Families Less Likely to Attend University?

2. Where would you obtain more information on RESPs?

3. Do you find that more students are working today to pay for their education?

Posted by & filed under Accounting Careers, Canadian Economy.

 

One in three employers around the world is having a hard time finding qualified talent —

 including accounting and finance staff — according to a survey by US-based global staffing

service ManpowerGroup. Of the employers polled, 90% say available job candidates do not

have the necessary skills and experience, have insufficient qualifications or lack soft skills.

The hardest jobs to fill globally this year are:

1. Technicians
2. Sales representatives
3. Skilled trades workers
4. Engineers
5. Labourers
6. Management/executives
7. Accounting and finance staff
8. IT staff
9. Production operators
10. Secretaries, administrative assistants and office support staff.

 Information obtained from the September Issue of CA magazine:

Discussion Questions:

1. Are you considering a profession in Accounting? Why?

2. Do you think there will always be a demand for Accountants, in both good and poor economies?

3. Do you know anyone who works in Finance? What do they do?

 

 

 

 

 

 

Posted by & filed under Accounting Careers, Corporate Restructuring.

Why are we considering the creation of a new designation?

We are witnessing an irreversible international trend in which forces are converging around three major bodies: the American Certified Public Accountants (CPAs), the Global Accounting Alliance (GAA), made up of 11 of the leading accounting organizations in the world, and the Association of Chartered Certified Accountants (ACCA) of the United Kingdom.

The CPA is already an extremely strong brand, both within North America and around the globe. In fact, it is the most used accounting designation worldwide. This designation will evolve into a globally recognized business credential in the areas of financial and strategic management, business leadership, and auditing and assurance competencies. In our view, it is essential that we align ourselves with the global accounting designation of choice, should a single designation emerge.

The designation

Members are proud of their professional designation. For that reason, they will retain their current designation (CA, CGA, CMA) and add the Quebec and Canadian Chartered Professional Accountant – CPA designation. They will be designated as follows:

First Name Last Name, CPA, CA

First Name Last Name, CPA, CGA

First Name Last Name, CPA, CMA

All members in good standing of the three existing accounting Orders will be granted the CPA designation while retaining their current professional designation.

The use of both designations will be mandatory for 10 years. After this period, members will have the choice of using the CPA alone or of continuing to use the CPA, CA, or the CPA, CGA or the CPA, CMA.

Besides being the most used worldwide, this designation will evolve into a globally recognized business credential in the areas of financial and strategic management, business leadership, and auditing and assurance competencies.

This designation will represent a unique combination of expertise in all areas of accounting, including financial and management accounting and taxation.

Retention of rights

The unification agreement will protect the rights of members of the three accounting Orders, such as public accounting licensing rights and rights under any existing Mutual Recognition Agreements. However, no new rights will be granted and there will be no expansion of current rights.

For example, members of the new Order who would like to practice public accountancy will be required to hold a public accountancy permit, which will allow them to use the CPA auditor designation.

Documentation obtained from the Ordre des comptables agrees du Quebec ordre des comptables agrees:

Discussion Questions:

1. Which professional designation were you considering of obtaining?

2. Would the creation of only one Public Accounting Designation be beneficial to you, from an economic point of view, especially if the Designation is recognized world wide?

3. Will confusion be eliminated by having only one designation?

Posted by & filed under Accounting Careers, Financial Accounting, Financial Statement Analysis, Managerial Accounting.

Small business owners in Canada are a happy group, a new survey says. In fact, 62% of Canadian small business owners would describe themselves as “very happy” with only 1% saying they are “very unhappy.”

These are just some of the findings from TD’s Small Business Happiness Index, which examined the attitudes and behaviour of Canadian small business owners in seven urban centres. It  revealed that nearly 9 in 10 Canadian small business owners are happier owning and running their own business than they would be if working for someone else.

Why are small business owners so happy?
There are several reasons for Canadian small business owners’ high satisfaction levels. These include a sense of pride and accomplishment (97%) plus a deep personal connection to their employees (91%) and their customers (84%).

The challenges
As rewarding as it is, small business ownership also has its difficulties. The top three cited were managing, recruiting and training staff (24%), coping with stress and risk (23%), and financing and cash flow (22%).

  • Keep a close eye on the key metrics that are essential to your business’ success
    “It is impossible to analyze every part of your business every day.  Instead, ask yourself, what are those essential measures that determine the health of your company? Whether it is speed of inventory turnover, utilization rates or total cash in the bank, ensure you have a system in place that provides an easy way to check those numbers in real time.”
  • Understand how to read an income statement and balance sheet
    “Put yourself in the shoes of your investors, the bank where you would like a loan, or a potential buyer down the road and make sure you’re at ease with how to read — and explain — your financial statements.”

Forget the static five-year plan
“Given the speed of business today and the impact of ever-changing technology, a static business plan that lasts five years may be unrealistic. Your business plan should be a living document, updated at least annually with a rolling three-year forecast to make sure your business stays on track. And it’s essential to have both a long-term vision for your company and a series of short-term goals. 

  • Keep a close eye on the key metrics that are essential to your business’ success
    “It is impossible to analyze every part of your business every day.  Instead, ask yourself, what are those essential measures that determine the health of your company? Whether it is speed of inventory turnover, utilization rates or total cash in the bank, ensure you have a system in place that provides an easy way to check those numbers in real time.”

  • Understand how to read an income statement and balance sheet
    “Put yourself in the shoes of your investors, the bank where you would like a loan, or a potential buyer down the road and make sure you’re at ease with how to read — and explain — your financial statements.”

Forget the static five-year plan
“Given the speed of business today and the impact of ever-changing technology, a static business plan that lasts five years may be unrealistic. Your business plan should be a living document, updated at least annually with a rolling three-year forecast to make sure your business stays on track. And it’s essential to have both a long-term vision for your company and a series of short-term goals.

For more details read the complete the CA magagine article

Discussion Questions:

1. Why is it important for business owners to have financial accounting information?

2.For a business owner, would you conider having both knowledge of management accounting and financial accounting?

3. Would you consider the following ratios: Current Assets and Quick Ratios to be an important tool, to manage a small business?

Posted by & filed under Accounting Careers, Uncategorized.

India, one of the world’s largest economies, has become one of the most critical markets for global Diversified Industrial companies.

 Fast Facts

• India is the world’s largest democracy and the 12th largest economy in the world.

• Among BRIC (Brazil, Russia, India and China), countries, India is expected to deliver the highest growth rates over the next 50 years.

• A rise in discretionary income and a growing appetite for global brands means the market is poised to become an important consumption hub as well.

• An over reliance on domestic demand could curb growth. Exports comprise only 20 percent of India’s manufacturing output, compared to 50 percent for China.

 • To address these issues, the Indian government has become increasingly engaged, pushing a series of inward investments and backing policies designed to stimulate manufacturing growth.

 Strength:

With India’s economy continuing its rapid growth, the Diversified Industrials (DI) sector is well-poised to reap the benefits. The country remains a favoured outsourcing hub for many multinationals as well, not just for lower-cost manufacturing, but increasingly as a source of higher value innovation in engineering, materials and design.

 Weakness:

India still faces severe infrastructure issues, with roads, rail systems and airports in need of significant upgrades in order to keep pace with the needs of global businesses. Much depends as well on government commitments to advance policies and make good on its investment promises to support the manufacturing sector.

A history of rapid growth

 Growth accelerated after a series of market reforms opened India’s markets to foreign competition. Today, among the BRIC group of countries (Brazil, Russia, India and China), India alone is considered to have the potential to show the highest growth (over 5 percent) over the next 50 years.

 The Government of India, taxation policies

 The Government is proposing several changes to its tax laws as well in an effort to boost exports and encourage inward investment. These include a simplified tax code that the Government hopes will reduce indirect taxes and lower the overall tax burden. These programs are also expected to ease restrictions on the size of foreign equity investments and trim the number of licenses and other permits formerly required of companies headquartered outside of India.

 Read the complete Article “The India Opportunity” KPMG

Discussion questions:

  1. Do you think that China and India will be the next superpowers?
  2. Does India have the human resources to compete ona world scale?
  3. What do you think will happen to the USA and Canada when the BRIC countries are fully developed economic powers?

Posted by & filed under Canadian Economy, Corporate Restructuring, Taxation & Planning.

To Lower or not to Lower Corporate Tax Rates? Let us look at a few conflicting arguments. We are presently in the mist of a Federal Election, and all the major parties have different arguments to increase or decrease taxes.

All three parties basically seem to get the notion of corporate competitiveness and the link to job creation. The Conservatives, Liberals and the New Democratic Party differ as to where Canadian companies fit in the international landscape and whether chopping what these firms pay to Ottawa is the best way to create jobs. Of course, some of these variations are the result of political calculations by the federal parties, designed to position themselves to get the most votes.

 The battle is joined

 Some like the notion of chopping what firms pay.

 “The recent and planned general corporate rate reductions are good for the economy with a minimal impact on government revenues,” Jack Mintz, Palmer Chair of Public Policy, School of Public Policy at the University of Calgary, wrote in a recent opinion piece in the National Post. 

 Waving the low-tax flag

 At first blush, the case for knocking down company taxes would appear to be fairly straightforward.

 “To increase after-tax cash flow — leave more money in the hands of business to invest,” noted Jeff Brownlee, vice-president of public affairs and partnerships for the Canadian Manufacturers and Exporters, an Ottawa-based business group.

Simply put, if a company has more cash on hand, it can buy more performance-enhancing machinery or hire new workers.

Conversely, if the government takes away that money, public officials are more likely to waste at least some of those tax dollars on inefficient projects, losing the maximum benefit the money could have on the overall economy.

 Hiking profitability

 Increasing corporate taxes may cause corporations to move to other countries that offer lower taxes and thus lose jobs in the process. The higher cost of paying taxes, may cause corporations to pass on the increase cost to consumers.

 To read more: See CBC News

  Discussion Questions:

  1. If corporations were to pay lower corporate taxes: Who would be the beneficiaries?
  2. Do you agree with the following statement: “Large multinational corporations may move their head offices and place of business to lower tax jurisdictions”.
  3. Thinking question: With the increasing prevalence of the internet, worldwide consumers may purchasing online, in which country or jurisdiction should  corporate profits be taxed? 

Posted by & filed under Accounting Principles, Advanced Accounting, Financial Accounting, Financial Reporting and Analysis, IFRS.

IFRS( International Financial Reporting Standards)  for SMEs (Small Medium Enterprises) is a separate comprehensive set of standards for non-publicly accountable entities that is the result of a five-year development process with extensive consultation with SMEs worldwide. It simplifies many of the principles in full IFRSs for recognition and measurement, omits topics not relevant to SMEs, and significantly reduces the number of required disclosures. It is intended to be a full set of accounting principles for private companies in 230 pages.

 Listen to the KPMG web cast:  Excellent Web Cast , you may also , review the power point presentation , which is available to download for free, upon registration to the Web Cast.

  Discusses what other countries are doing, to resolve the issues of Small Medium Enterprises, as to how to present financial statements for Private Companies.

    Should we adopt a New GAAP to represent Private Companies

    Should we adopt an IFRS Framework and remove certain portions non applicable to Private companies.

    How does Corporate Governance aid in preparing accurate and fairly presented financial statements

    Continue the Status Quo, keep IFRS for Publicly Accountable Companies and keep the present GAAP for Private enterprises.

Discussion Questions:

  1. If you were responsible to make changes: How would you change things to make information more relevant to financial statement users?
  2. Would you consider an  IFRS  model that has been simplified to suit Private Entities?
  3. Should we have a Canadian Way for Private Company GAAP or should all countries that adopted IFRS, adopt a common Private Entity GAAP?

 Web Cast hosted by Janice Patrisso, KPMG partner: KPMG, The Future of Private Company Reporting,

Posted by & filed under Canadian Economy, Financial Accounting.

Bauer heads to the TSX  

  

Canadians claim that “hockey is our game,” but that boast disguises 

deep-seated unease over the creeping Americanization of the professional sport.

That is why we hold on to nostalgic fantasies of the Jets returning to Winnipeg, the Nordiques going back to Quebec City, and the Maple Leafs returning to the Stanley Cup playoffs. Sometimes nostalgic fantasies do come true.Top hockey equipment maker Bauer Performance Sports Ltd. announced at the beginning of March that it had completed an initial public offering to sell 10 million shares at $7.50 a share. The money will be used to acquire 100% of Kohlberg Sports Group Inc., and the company will list on the Toronto Stock Exchange.

 

 Founded in London, Ont., in 1927, Bauer produced the first skate in which the blade was permanently secured to the boot. It became a wholly owned subsidiary of Nike in 1994 and rebranded as Nike Bauer, then was sold to private equity investors in 2008. While the shares are priced at the low end of the floated range, CEO Kevin Davis was exuberant. “Our company is on a great growth trajectory, and we have a lot of exciting growth opportunities in the future, and this is a great way for us to have access to consistent capital,” he said. “So we’re really excited about what this means to our future.”

 

  

Article written by–ANDReW POTTeR  see www.canadianbusiness.com April , 2011 issue

 

Discussion Questions:

 

1. Would you consider purchasing common shares in Bauer Performance Sports Ltd.?

2. Do you agree with the CEO that Equity Financing is the best way to obtain cash for future growth?

3.  In your opinion in tough economic times would debt financing be considered a safe approach to obtain cash?

 

 

 

 

Posted by & filed under Accounting Careers, Corporate Restructuring, Taxation & Planning.

Beginning of Story Content

When small business owners ask Diana Dolack whether they should incorporate, she often advises against it.

“There’s not too many I advise to incorporate,” says Dolack, an H&R Block franchise owner in Biggar, Sask. “For farmers, especially, the rules are more beneficial to not being incorporated.”

The formula for Dolack is quite simple.

“If you need to spend all your profit to live on, then you don’t need to incorporate because you have nothing to shelter,” she said. “A corporation is a lot of extra paperwork, higher accounting fees and takes a lot of extra time.”

Once incorporated, a business is a distinct entity from the business owner. The corporation has its own legal status, property, rights and liabilities. It differs from a sole proprietorship in that the money and other assets belong to the corporation, not the individual or shareholders, and it is taxed separately at a corporate tax rate.

A business can be incorporated federally or provincially depending on where it operates.

Ron Ellis, a criminal defence lawyer based in London, Ont., says he’s often asked about incorporating but still hasn’t taken that step.

“I’m 44 years old, recently into the practice of law as of 2004, and only been a sole practitioner since 2006,” Ellis said. “And while my practice is growing nicely, I have two kids in university so am assisting with funding. I need all the money I make right now. But I expect in time, I will be in a better position to incorporate as I expand.”

Keeping it simple

For the thousands of sole proprietors or partners out there who choose not to incorporate, a big motivation is keeping the tax work as simple as possible, said Christopher George, founder of Christopher M. George Chartered Accountant Professional Corporation in Toronto.

“There are less tax-compliance issues and fewer returns to file,” George said. “And it’s cheaper — about $75 — to just register your business as a sole proprietorship or partnership. Incorporation could cost you north of $1,000.”

As an unincorporated proprietor, tax filings are simply a matter of filling out the T2125 Statement of Business and Professional Activities form and including it with your personal tax return.

“You put it on your personal return, and you’re done with it,” George said.

“Most people just don’t have the technical ability or time to prepare financial statements, balance sheets, income statements and all that goes with it.”

Of course, avoiding the paperwork and costs of incorporation does not mean underestimating the value of good accounting practices.

For many sole proprietors who do their own taxes, it’s important to know what you can deduct — and how much. More often than not, George says, those proprietors aren’t deducting enough.

“Usually, their expense claims are way too low,” he said. “I’ve seen people claim only $35 a year for their cellphone, or underestimate their car expenses. Or I see someone with a wife and two kids that isn’t taking advantage of income splitting. People just don’t seem to understand what reasonable expenses are.”

Usual deductions

There are, of course, the usual deductions: any advertising (websites, newspapers, etc.), business meals, entertainment, insurance costs, and interest on loans relating to your business, as well as car and office expenses.

If you run a home office, you can claim a portion of your home expenses, including mortgage interest, home insurance, utilities and renovation costs.

Also, don’t forget business travel expenses, including cellphone and internet charges.

“What I encourage people to do is to track everything they spend when travelling and have a checklist to see what types of expenses can be written off,” George said. “Then, you just add your receipts and fill in the boxes.”

When in doubt, he recommends dividing expense items by revenues to see if the percentages being claimed are reasonable. For example, if you have revenues of $100,000 and $3,000 in meals and entertainment expenses, that translates into an acceptable three per cent.

“If those expenses were 20 per cent of your revenues, then your tax return might get pulled aside,” said George.

‘Reasonable’ payments

Income splitting is also a good way to optimize your tax dollars, George said.

“Be careful with that, since you have to show that what you paid a family member is reasonable for the work they have done,” he said. “If you’re paying someone $275,000, that’s going to cause the Canada Revenue Agency to take a look.”

If you have purchased a car, you can deduct a capital cost allowance for depreciation, as well as an appropriate percentage of gas, loan interest, insurance, licence, registration and maintenance costs.

In the case of leasing, you simply write off a percentage of the lease amount along with the day-to-day running expenses. In order to support the claim and ensure percentages are accurate, the Canada Revenue Agency advises professionals to keep a logbook that records kilometres driven for business purposes.

While some self-employed individuals avoid seeking professional help to save themselves costs, fees usually end up being less than the extra taxes saved, George says.

“A one-hour consultation will give you a good understanding as to how everything works, what can be claimed or not,” he said. “You could end up savings tens of thousands of dollars over your lifetime.”

By Denise Deveau, special to CBC News

Discussion Questions:

1. When would it be more advantageous to incorporate? (Hint Small business pay less than 20% tax, taxpayers tax rate increase gradually to more than 50%)

2. Why is income splitting advantageous?

3. What is meant by reasonable expenses?

Posted by & filed under Accounting Careers, Taxation & Planning.

What you need to know before earning income abroad

As more students and young adults take time out to indulge in longer-term international travel, income tax filing is probably the last thing they think about.

When weeks abroad stretch into months, however, picking up some extra income is often the best way to make ends meet. At that point, it pays to know the ins and outs of what types of income you need to report — and how — when filing tax returns.

If you don’t pay attention, you could end up paying double taxes on income earned in foreign countries or simply end up mired in more paperwork than you need to be. Worse yet, you could get caught out for non-payment and be saddled with all the headaches that go with it.

How you manage your income reporting depends on the laws of the country you’re working in, says Philippe Brideau, a spokesperson for the public affairs branch of the Canada Revenue Agency in Ottawa.

Ways to avoid double dipping

Scenarios can differ depending on your location, your tax status at home and the conditions of the treaty agreement, if any, the country has with Canada.

For example, your foreign income — even if it’s a few hours a week serving coffee at a local café — may be taxed at source in that country. In all likelihood, you will also have to report that same income on your Canadian tax return because you are still a resident of Canada.

Tax filing for foreign income

Understanding your tax filing requirements for foreign income can save you a lot of administrative headaches during and after your travels.

 Below are some guidelines and resources from Revenue Canada to help you get started:

  • A person leaving Canada temporarily is considered a “factual resident” of Canada, which means their income earned inside and outside the country is taxable.
  • Individuals or students working or studying abroad may claim all deductions and credits that apply to them. For information, refer to pamphlet T4131, Canadian Residents Abroad, and P105, Students and Income Tax. Some useful links include:
  • To prevent double taxation, check to see if the country in which you are working has a bilateral agreement with Canada. Canada has 86 tax treaties in force, each of which may have its own nuances, so it’s important to do your research. These can be found on the Department of Finance website.
  • Canadian residents who pay tax on income while in another country may be able to claim a foreign tax credit for taxes paid elsewhere when filing their Canadian return. Information about the foreign tax credit is available in the General Income Tax and Benefit Guide and in Interpretation Bulletin IT-270R3, Foreign Tax Credit.

“In such a circumstance, the individual could be subject to tax in both countries on the same income,” Brideau said.

However, there are provisions to help you avoid paying tax twice on the same income if you are earning income in a country that has a tax treaty with Canada.

For example, there may be a provision that will restrict or exempt you from income taxation in a given country, but you will still be required to report that income on your personal income tax return in Canada under the foreign-sourced income section.

In other cases where both countries retain the right to tax your income, you may be able to deduct foreign tax paid on your Canadian income tax form.

To avoid the risk of double taxation, Brideau advises individuals to consult the provisions of the treaty in question before they go abroad to make sure they know what to expect and what paperwork needs to be filled out in advance.

No one-size-fits-all approach

Pramen Prasad, managing partner with Toronto CA Solutions Inc., a business advisory services firm, says that when it comes to reporting foreign income, there isn’t a one-size-fits-all approach.

“It’s important to be aware of the tax implications of earning income worldwide,” Prasad said. “But there are also different scenarios depending on your work/education status, what type of work visa you have, the jurisdiction you’re in, etc.”

There are some general rules of thumb that can provide the baseline for making the right filing decisions, he said.

“The first thing to look at is your present filing position,” says Prasad. “The key issue is that taxation is based on residency, not citizenship. If you are not severing your residency ties with Canada while abroad, you are still considered a resident for taxation purposes and must prepare and file a Canadian tax return reporting all income earned.”

In some cases, a person will break ties with Canada. This may apply if you are spending extensive time abroad and perhaps working in a “tax friendly” jurisdiction. Ties can be reinstated on your return.

This can be a major undertaking, however, since you have to ensure you don’t have Canadian bank accounts or residence and that you have cancelled your health coverage. Cancelling your driver’s licence is optional.

While it all seems like a lot to take in when you’re caught up in the excitement of planning an extended trip abroad, staying ahead of the game is not as complicated as it sounds. It just means a bit of homework ahead of time, Prasad says.

“If someone is looking to study or work abroad, it pays to get some tax advice or do some web research, and obtain tax advice from a professional accountant.

For more information see: CBC News website 

By Denise Deveau, special to CBC News

Discussion questions:

1. Why do you think Canadians are taxed on their World Income?

2. How can you avoid double taxation?

3. Canadians are taxed based on Residency and not based on Citizenship: Define Residency  for Canadians?