Two seasons of unsold stock sit in the back of a warehouse. Everybody knows it will never sell at cost. The accounts carry a five percent obsolescence provision that has been there for years, and the tax return claims nothing at all for either.
Key Takeaway
Subsection 10(1) requires inventory to be valued at the lower of cost and fair market value, which produces a deduction without any disposition. CRA directs that the comparison be made separately and individually for each item, so gains on some lines cannot absorb losses on others. But commentary states that a general reserve or percentage applied overall is not deductible, while a specific item or class write-down is. A business that is an adventure or concern in the nature of trade values inventory at cost only under subsection 10(1.01), with no write-down available at all.
A Note On Currency
Everything here is stated as verified in August 2026 and requires confirmation before reliance.
Our principal CRA source is Interpretation Bulletin IT-473R, Inventory Valuation, which CRA publishes as archived[2]. Its worked example uses the 1997 and 1998 taxation years, which dates it plainly. We use it for its statements of principle and flag the vintage.
We obtained parts of section 10 from the statute[1], several of them truncated, and did not read the section in full.
A CRA technical interpretation from 2025 is reproduced by a subscription tax service and we obtained its questions and its stated conclusions but not its full reasoning[3].
The proposition that a general percentage reserve is not deductible comes from a single accounting practice publication[4], and we flag that it is not corroborated in our other sources.
We did not research the determination of cost itself, being what may or must be included in it, which is a substantial subject this article does not open.
This is not tax advice.
The Provision
The rule, quoted from the statute.
Subsection 10(1) provides that for the purpose of computing a taxpayer's income for a taxation year from a business that is not an adventure or concern in the nature of trade, property described in an inventory shall be valued at the end of the year at the cost at which the taxpayer acquired the property or its fair market value at the end of the year, whichever is lower, or in a prescribed manner[1].
Three features, and this breakdown is ours.
It is mandatory. Inventory shall be valued that way. This is not an election a business opts into.
The comparison is at the end of the year, which makes the year end the measurement date for a judgment about value.
And the phrase or in a prescribed manner opens a second route, which the next section describes.
The exclusion at the front matters as much as the rule. A business that is an adventure or concern in the nature of trade is outside subsection 10(1) entirely, and is dealt with separately below.
Two Methods, Not One
The permitted approaches, as CRA sets them out.
CRA states that subject to exceptions, subsection 10(1) of the Act and section 1801 of the Regulations provide for the following methods of valuing inventory: valuation of each item in the inventory at the cost at which it was acquired or its fair market value at the end of the year, whichever is lower; or valuation of the entire inventory at its fair market value at the end of the year[2].
A 2025 CRA interpretation restates the same two methods in the same terms[3], which is useful corroboration of a bulletin CRA publishes as archived.
Two observations, ours.
The second method, the entire inventory at fair market value, is the one almost nobody uses, and it can produce a higher figure than cost where stock has appreciated.
Which is why it appears in this series' acquisition of control article as an elective step-up in a different context. It is a real option and it cuts both ways.
For most businesses the operative method is the first, and everything below concerns it.
No Disposition Required
The feature that makes this worth an article. This section is our own analysis.
Almost every deduction a business claims is attached to something happening. A cost is incurred, an asset is sold, an amount is paid.
An inventory write-down is not. The stock stays on the shelf. Nothing is scrapped, nothing is sold, nothing leaves the building.
The deduction arises because closing inventory is a subtraction in the cost of goods sold computation. A lower closing figure produces a higher cost of goods sold and therefore lower income.
Three consequences.
The business gets the deduction while still owning the goods, and can sell them later for whatever they fetch.
There is no transaction to prompt anyone. No invoice, no disposal, no bank entry. The deduction exists only if somebody decides to look at the stock and form a view.
And that decision has to be made at year end, which in most businesses is the busiest possible moment to be walking a warehouse forming valuation judgments.
Our own observation is that this combination, a real deduction with no transaction behind it and a hard deadline, is why it goes unclaimed.
What The Write-Down Is Worth
The magnitude, computed by us on illustrative figures.
Take four inventory lines: fast-moving stock costing $420,000 now worth $455,000; prior season lines costing $180,000 now worth $74,000; discontinued items costing $96,000 now worth $18,000; and core staples costing $310,000 now worth $318,000.
Total cost is $1,006,000.
Applying the lower of cost and fair market value to each line gives $420,000, $74,000, $18,000 and $310,000, being $822,000.
The deduction created is $184,000, worth roughly $23,000 at an assumed 12.5 percent small business rate.
Two observations, ours.
The figures are ordinary. A million dollars of stock with two problem lines is an unremarkable retailer or distributor.
And the $23,000 is available in the year the value falls, not in some later year when the stock is finally cleared. Deferring it costs the time value and, if the business has a good year and then a bad one, potentially the rate difference too.
Item By Item, Not In Total
The mechanical rule, and it is stated with unusual precision.
CRA directs that in comparing cost and fair market value in order to determine which is the lower, the comparison should be made separately and individually in respect of each item, or each usual class of items if specific items are not readily distinguishable, in the inventory. And that the lower figure for each such item, or each such class of items, should be extended and carried forward in arriving at the total value of the inventory[2].
Three observations, ours.
The unit is the item, with a fallback to a usual class of items where individual items are not readily distinguishable. That fallback is generous and practical for a business with thousands of interchangeable units.
The instruction to extend and carry forward each line's lower figure describes an arithmetic process, not a judgment. Once the line values are set, the total is mechanical.
And it means the business must have a value per item or class, not a value for the inventory. That is the real work, and it is what a business avoiding the exercise is avoiding.
What Netting Costs You
The arithmetic consequence of that rule, computed by us on the same figures.
Compared in aggregate, the inventory costs $1,006,000 and is worth $865,000. The lower of those two is $865,000, producing a deduction of $141,000.
Compared item by item, as CRA directs, the total is $822,000, producing a deduction of $184,000.
The aggregate approach understates the deduction by $43,000.
Two observations, ours.
The gap arises because in the aggregate comparison, the appreciation on the two healthy lines absorbs part of the loss on the two problem lines. Item by item, it cannot.
Which means the rule favours the taxpayer here. The item-level comparison recognises the losses and ignores the unrealised gains, because those lines are held at cost.
That is worth stating because CRA's directions are usually read as constraints. This one is a requirement that produces a larger deduction than the intuitive shortcut would, and a business taking the shortcut is under-claiming.
The Provision That Does Not Work
The approach most businesses actually use, and the reason it fails.
Commentary states that general reserves for inventory valuation are not permitted for tax purposes in relation to Canadian corporations, and that while a deduction or write-down of a specific inventory item or a class of inventory items to fair market value is permitted, a general reserve or percentage applied overall to a Canadian company taxpayer's inventory is not deductible for tax purposes[4].
We flag that this comes from a single accounting practice publication and is not corroborated in our other sources. It is nonetheless consistent with the item-by-item direction in CRA's bulletin, which is why we report it.
Our own arithmetic on the same inventory: a general obsolescence reserve of five percent of $1,006,000 is $50,300.
Three consequences.
That $50,300 is the figure sitting in the accounts of a great many businesses, and on this account none of it is deductible.
The $184,000 that is deductible is a different number arrived at a different way, and it is nearly four times larger.
So a business with a percentage reserve is simultaneously claiming something it cannot and not claiming something it can.
Same Intuition, Opposite Result
Why this trips businesses up. This section is our own analysis.
Both approaches come from the same honest recognition: some of this stock will not sell for what we paid.
The percentage reserve expresses that as a general allowance. It is easy to compute, it is stable year to year, and it is what accounting practice often produces.
The write-down expresses it as a set of specific judgments about specific goods.
The tax system accepts only the second, and the reason is visible in the rule. A percentage is not a valuation of anything. It is an estimate about the inventory as a whole, and subsection 10(1) asks for the value of property, item by item.
Two practical consequences.
The work required is identification rather than estimation. Which lines, which quantities, and what are they now worth.
And that work produces something the percentage never does: evidence. A schedule naming the items and their reduced values is defensible in a way that a percentage is not, which matters for the reason set out three sections below.
One Business Cannot Do Any Of It
The exclusion at the front of subsection 10(1), and it removes the whole relief.
Subsection 10(1.01) provides that for the purpose of computing a taxpayer's income from a business that is an adventure or concern in the nature of trade, property described in an inventory shall be valued at the cost at which the taxpayer acquired it[1].
CRA applies it directly in its 2025 interpretation, noting that where the taxpayer is engaged in an adventure or concern in the nature of trade, the obsolete assets can generally only be valued at the cost at which they were acquired[3].
Three consequences, ours.
There is no lower-of test. Cost is the value, whatever the property is now worth.
So on the illustrative inventory above, a business in this category has a deduction of nil rather than $184,000.
And the classification is not elective. Whether an activity is an adventure or concern in the nature of trade is a question of fact determined on the circumstances, and this publication has touched the concept elsewhere in the property context.
The practical significance is that a business making one-off speculative acquisitions alongside its ordinary trade may have property in both categories, with write-downs available on one and not the other.
The Consistency Rule
The constraint on changing approach.
Subsection 10(2.1) provides that where inventory of a business that is not an adventure or concern in the nature of trade is valued at the end of a taxation year in accordance with a method permitted under this section, that method shall, subject to subsection 10(6), be used in the valuation of property described in the inventory at the end of the following taxation year, unless the taxpayer, with the concurrence of the Minister and on any terms and conditions that are specified by the Minister, adopts another method permitted under this section[1].
Two observations, ours.
The default is continuity. Whatever method was used last year is the method for this year.
And departure requires the Minister's concurrence, which is a permission to be sought rather than a position to be taken. It may come with terms and conditions.
That sounds restrictive, and it is narrower than it first appears, for a reason CRA states expressly and which the next section sets out. It is the most useful distinction in this article.
Two Changes, Opposite Requirements
A distinction CRA draws that separates two things practitioners often treat alike.
CRA states that subsection 10(2.1) applies to the method of valuing property described in an inventory and not to the method of determining the cost or the fair market value of such property[2].
It then works both cases. A taxpayer valuing inventory at the lower of cost and fair market value, using average cost to determine cost, who wishes to value the entire inventory at its fair market value, is changing the method of valuing, and the approval of the Minister under subsection 10(2.1) is required[2].
But a taxpayer who continues to value the inventory at the lower of cost and fair market value but wishes to use the first in, first out method to determine the cost is not changing the method of valuing, and the approval of the Minister would not be required[2].
Three consequences, ours.
Two changes that feel equally significant to a controller have opposite procedural requirements.
Moving from average cost to FIFO, which changes reported profit and is a substantial accounting decision, needs no approval under this provision.
Moving from lower-of to fair market value, which many businesses would never contemplate, does.
The organising idea is that subsection 10(2.1) governs which of the two permitted valuation methods you use, and is silent on how you arrive at the inputs to either. We note that CRA's illustration uses the 1997 and 1998 taxation years, which places the bulletin firmly in the past.
One Method Canada Does Not Allow
A boundary on determining cost.
Commentary states that in Canada under IFRS and ASPE, the main cost formulas are FIFO, weighted average, and specific identification, and that LIFO is not permitted[5].
Two observations, ours.
That source is describing accounting standards rather than the Income Tax Act, and we did not establish the tax position independently. We report it as an accounting constraint that in practice determines what a Canadian business's cost figures look like.
And it matters because the cost side of the lower-of test comes from the accounting system. Whatever formula produces cost there produces the cost used in the comparison.
Commentary adds a practical note worth passing on: write a one-page inventory policy with method, cost components, net realisable value review, and count procedures[5]. That single document would satisfy most of what the records section below asks for.
A 2025 Ruling On A 1970s Provision
A modern application, and a good demonstration that the section is live.
A CRA technical interpretation from 2025 addressed whether obsolete crypto-assets held as inventory could be written down under section 10[3].
Its stated conclusion: obsolete crypto-assets that are inventory can be written down in accordance with the inventory valuation rules in section 10 of the Act[3].
Two observations, ours.
Nothing in section 10 needed to change to accommodate an asset class that did not exist when it was drafted. The provision asks about property described in an inventory and about its cost and fair market value, and those questions are answerable for a token.
And the interpretation applies the adventure or concern in the nature of trade exclusion in the same breath, noting that a taxpayer in that category can generally only value the assets at cost[3]. That distinction is doing real work in a speculative asset class.
We obtained the questions and the stated conclusions from a subscription service reproduction and not the full reasoning, and note it accordingly.
Permanently Removed From Supply
The second question in the same interpretation, and its answer is narrow.
CRA was asked whether, if a write-down were not permitted, a loss could be realised by burning the obsolete crypto-assets, such as by transferring them to a burn address[3].
Its stated conclusion was yes, provided that burning the obsolete crypto-assets results in them being permanently removed from the circulating supply[3].
Two observations, ours.
The condition is permanence, and it is doing the work. A transfer that could be reversed, or to an address that could be controlled, would not satisfy it.
The general principle underneath is one every business with stock will recognise: a loss on disposal requires the property actually to be gone. Moving obsolete goods to a corner of the warehouse is not a disposal.
Which is why the write-down route matters. It is the mechanism that recognises a loss in value without requiring the business to destroy anything, and destruction is both wasteful and, in the crypto case, irreversible.
What CRA Asks To See
The third question in the interpretation, which tells you what the file needs.
CRA was asked for examples of documentation the taxpayer should be prepared to provide in support of a deduction in respect of the obsolete assets, either under the inventory valuation rules in section 10 or as a result of burning them[3].
We did not obtain CRA's answer to that question, only the fact that it was asked and answered.
What its presence establishes, and this is our own reading, is that CRA treats the evidentiary side as a distinct question from the legal one. Whether a write-down is permitted and whether it can be supported are two enquiries, and the interpretation addresses both.
Our own view of what a defensible file contains, drawn from the requirements set out above rather than from CRA's answer.
The items or classes written down, identified specifically, since the comparison is made item by item.
The cost of each, from the accounting system, and the basis on which cost was determined.
The fair market value at year end, with whatever supports it: subsequent sale prices, clearance realisations, supplier or market quotations, or evidence of no market at all.
And the date of the assessment, since the statute measures at the end of the year.
The Link To Acquisition Of Control
A connection to another article in this series.
Subsection 10(10) provides that notwithstanding subsection (1.01), property described in an inventory of a taxpayer's business that is an adventure or concern in the nature of trade at the end of the taxpayer's taxation year that ends immediately before the time at which the taxpayer is subject to a loss restriction event is to be valued at the cost at which the taxpayer acquired the property, or its fair market value at the end of the year, whichever is lower, and that after that time the cost at which the taxpayer acquired the property is deemed to be that lower amount[1].
Two observations, ours.
On a loss restriction event, the adventure-in-trade exclusion is suspended and the lower-of test applies for that year. So a business that could never write down is required to.
And the reduction is permanent: cost is deemed to be the lower amount going forward, which means the loss cannot be claimed again later.
That is the same mechanism our acquisition of control article described operating across other tax attributes: an event outside the business's control compels a realisation and resets a base. Inventory is on that list, and subsection 10(1) appears in it.
The Minister Can Restate Your Opening Figure
A provision with an unusual direction of travel.
Subsection 10(3) provides that where the inventory of a business at the commencement of a taxation year has, according to the method adopted by the taxpayer for computing income from the business for that year, not been valued as required by subsection 10(1), the inventory at the commencement of that year shall, if the Minister so directs, be deemed to have been valued as required by that subsection[1].
Two observations, ours.
It operates on the opening figure, which is the previous year's closing figure. So a mis-valuation can be corrected from the front of a year rather than the back.
And it is at the Minister's direction, not automatic and not the taxpayer's to invoke.
We did not research how or when it is used, and note it because a business assuming that an old inventory figure is settled by the passage of time should know the provision exists.
The Pattern This Series Kept Finding
A closing observation, on the fiftieth article of this series. This section is our own.
An inventory write-down is a real deduction, available without a sale, and it goes unclaimed constantly.
That is not an isolated finding. It is the same shape this series encountered repeatedly.
A firm over-charging tax on disbursements imposes an unrecoverable cost on clients that nobody will ever query.
A business capitalising a repair that was properly current waits eighteen years for a deduction it could have had at once.
A supplier that never claims the bad debt adjustment on tax it remitted for an invoice that was never paid.
A pharmacy treating zero-rated revenue as exempt and recovering less input tax than it is entitled to.
A veterinary clinic claiming conservatively on overhead because it thinks of itself as a health business.
A corporation that never applies for the refund of an unabsorbed logging tax credit.
Each is a different provision in a different tax. What they share is the direction of the error, and the reason it persists: nobody is ever assessed for claiming too little. The audit programme exists to find the other error, the feedback runs one way, and caution is mistaken for correctness because its cost is invisible.
If this series has one practical instruction across fifty articles, it is that. The conservative answer is not the same as the right answer, and it is the one nobody will ever tell you was wrong.
What The Auditor Actually Examines
The enquiry in practice. This section is our own analysis.
The closing inventory figure against the count and the costing records.
Any write-down claimed, and whether it was made item by item or as a percentage.
Support for the reduced fair market values, which is the evidentiary question.
Consistency of method with the prior year, under subsection 10(2.1).
Whether a change of valuing method was made without approval, as distinct from a change in determining cost.
Whether any activity is an adventure or concern in the nature of trade, which removes the write-down entirely.
Subsequent realisations on written-down stock, which either corroborate the valuation or contradict it.
The last item deserves emphasis and is our own. A write-down is a prediction, and the following year contains the evidence of whether it was right. Stock written down to eighteen thousand dollars and then sold for ninety thousand invites a question about the year before.
What Records Survive
The year-end count, with quantities by item or class.
Cost per item or class, and the formula used to determine it.
The fair market value assessment, item by item, dated at year end.
Evidence supporting each reduced value: clearance prices achieved, quotations, or evidence of no market.
A written inventory policy, covering method, cost components, value review and count procedures.
Any Ministerial approval obtained for a change of valuing method.
Subsequent sale records for written-down stock, which will be looked at either way.
What To Do
Walk the stock before year end, not after. The statute measures value at the end of the year, and the judgment has to be made then.
Write down to fair market value, item by item. CRA directs that the comparison be made separately and individually for each item or usual class.
Do not compare in aggregate. On our figures that understated the deduction by $43,000, because gains on healthy lines absorbed losses on dead ones.
Replace the percentage reserve with specific write-downs. Commentary states a general reserve is not deductible while a specific item or class write-down is.
Keep evidence of the reduced value. Whether a write-down is permitted and whether it can be supported are two different questions, and CRA's 2025 interpretation addresses both.
Check whether any activity is an adventure in the nature of trade. Subsection 10(1.01) removes the write-down entirely for that property.
Know which changes need permission. Changing the method of valuing needs the Minister's concurrence; changing the method of determining cost does not.
Write the one-page policy. Method, cost components, value review and count procedures. It answers most of what an examiner will ask.
Expect the following year to be looked at. What the written-down stock actually realised is the best evidence of whether the valuation was right.
And take the deduction. Nobody will ever assess you for having failed to claim it.
The Limits Of This Analysis
Several caveats matter. This is not tax advice. Everything is stated as verified in August 2026 and requires confirmation. Our principal CRA source, Interpretation Bulletin IT-473R, is published by CRA as archived, and its worked example uses the 1997 and 1998 taxation years; we have used it for its statements of principle and flag the vintage. We obtained parts of section 10 only, several truncated, and did not read the section in full. The 2025 CRA technical interpretation is reproduced by a subscription tax service; we obtained its questions and stated conclusions but not its full reasoning, and expressly did not obtain its answer on documentation. The proposition that a general percentage reserve is not deductible comes from a single accounting practice publication and is not corroborated in our other sources, though it is consistent with CRA's item-by-item direction. The statement that LIFO is not permitted comes from a source describing accounting standards rather than the Income Tax Act, and we did not establish the tax position independently. We did not research the determination of cost itself, being what may or must be included in it, which is a substantial subject this article does not open. We did not research the meaning of an adventure or concern in the nature of trade, subsection 10(6), section 1801 of the Regulations beyond CRA's summary of it, the treatment of work in progress which this publication addresses separately, farm inventory, the interaction with the capital gains rules, or the position of partnerships. All arithmetic is our own, uses an assumed rate and hypothetical figures, and is illustrative only. The no-disposition framing, the netting illustration, the same-intuition analysis and the closing observation on the direction of error are our own.
Frequently Asked Questions
Can we deduct a loss on stock we still own?
We carry a five percent obsolescence reserve. Is that deductible?
Can we just compare total cost to total value?
Do we need permission to change how we value inventory?
Does this apply to everything we hold?
What will an examiner focus on?
References
- Government of Canada. Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 10, as published, on subsection 10(1) requiring that for the purpose of computing a taxpayer's income for a taxation year from a business that is not an adventure or concern in the nature of trade, property described in an inventory shall be valued at the end of the year at the cost at which the taxpayer acquired the property or its fair market value at the end of the year, whichever is lower, or in a prescribed manner; on subsection 10(1.01) requiring property in the inventory of a business that is an adventure or concern in the nature of trade to be valued at the cost at which the taxpayer acquired it; on subsection 10(2.1) requiring a method permitted under the section to be used in the following taxation year, subject to subsection 10(6), unless the taxpayer with the concurrence of the Minister and on any terms and conditions specified by the Minister adopts another permitted method; on subsection 10(3) providing that where inventory at the commencement of a year has not been valued as required by subsection 10(1), it shall if the Minister so directs be deemed to have been so valued; and on subsection 10(10) providing that notwithstanding subsection (1.01), inventory of an adventure or concern in the nature of trade at the end of the year ending immediately before a loss restriction event is to be valued at the lower of cost and fair market value, with cost deemed thereafter to be that lower amount. Note: primary legislation. Obtained in part only, with several subsections truncated. laws-lois.justice.gc.ca
- Canada Revenue Agency. Interpretation Bulletin IT-473R, Inventory Valuation, on subsection 10(1) and section 1801 of the Regulations providing for valuation of each item at the lower of the cost at which it was acquired and its fair market value at the end of the year, or valuation of the entire inventory at its fair market value at the end of the year; on the comparison of cost and fair market value being made separately and individually in respect of each item, or each usual class of items where specific items are not readily distinguishable, with the lower figure for each extended and carried forward to arrive at the total; on subsection 10(2.1) applying to the method of valuing property and not to the method of determining its cost or fair market value; on a change from the lower of cost and fair market value to fair market value requiring the approval of the Minister; and on a change from average cost to first in, first out for determining cost not requiring that approval. Note: CRA publishes this bulletin as archived, and its worked example uses the 1997 and 1998 taxation years. canada.ca
- Canada Revenue Agency Technical Interpretation 2025-1050641E5, Losses on Obsolete Crypto Inventory, as reproduced by a subscription tax service, on subsection 10(1) and section 1801 of the Regulations making available in most cases either valuation of each item at the lower of cost and fair market value at the end of the year, or valuation of the entire inventory at its fair market value at the end of the year; on subsection 10(1.01) meaning that where the taxpayer is engaged in an adventure or concern in the nature of trade the obsolete assets can generally only be valued at the cost at which they were acquired; on the stated conclusion that obsolete crypto-assets that are inventory can be written down in accordance with the inventory valuation rules in section 10; on the stated conclusion that a loss can be realised by burning the assets provided that this results in them being permanently removed from the circulating supply; and on the third question posed, concerning examples of documentation the taxpayer should be prepared to provide in support of a deduction. Note: accessed through a subscription service reproduction. We obtained the questions and stated conclusions but not the full reasoning, and did not obtain the answer on documentation. videotax.com
- Green Quarter Accounting. What Is a Reserve for Tax Purposes: Canadian Corporations, on general reserves for inventory valuation not being permitted for tax purposes in relation to Canadian corporations; on subsection 10(1) requiring inventory to be valued at the lower of cost and fair market value or in a prescribed manner; on a deduction or write-down of a specific inventory item or class of inventory items to fair market value being permitted; and on a general reserve or percentage applied overall to a Canadian company taxpayer's inventory not being deductible for tax purposes. Note: a single accounting practice publication; this proposition is not corroborated in our other sources, though it is consistent with CRA's item-by-item direction at reference 2. green-quarter-accountants-bookkeeping.com
- Big Country Accounting. Inventory Valuation Methods Explained: A Practical Guide for Western Canadian Businesses, on the main cost formulas in Canada under IFRS and ASPE being FIFO, weighted average and specific identification, with LIFO not permitted; on FIFO flowing the oldest costs to cost of goods sold so that ending inventory carries the most recent costs, suiting retail, wholesale and manufacturing where items are interchangeable, at the cost of higher profits and potentially higher taxes when prices rise; on ending inventory value influencing taxable income; and on the recommendation to write a one-page inventory policy covering method, cost components, net realisable value review and count procedures. Note: an accounting firm publication dated 2026 describing accounting standards rather than the Income Tax Act; we did not establish the tax position on LIFO independently. bigcountryaccounting.com
- Insight Accounting CPA. Inventory Accounting Methods for Canadian Businesses: FIFO, Weighted Average and Best Practices, on the Canada Revenue Agency requiring inventory to be valued at the lower of cost or fair market value for tax purposes, described as similar to the lower of cost and net realisable value under ASPE. Note: an accounting firm publication; we use it only as corroboration of the general rule. insightscpa.ca
This article is provided for general informational purposes and is not tax advice. Its principal CRA source is a bulletin CRA publishes as archived, with a worked example from the 1997 and 1998 taxation years. Section 10 was obtained in part only. The 2025 technical interpretation was obtained through a subscription service reproduction without its full reasoning. The proposition that a general percentage reserve is not deductible rests on a single source. The determination of cost is not addressed. All arithmetic is the authors' own and is illustrative only.