CPA Canada's management accounting guidelines

 My previous post outlined the various generations of Management Accounting Guidelines that had been issued by CMA Canada over the 30 years prior to the CPA Canada merger. There have been several issued since that time, and are described as having the following intent:

Change. It's global. It's constant. It's disruptive. It's the one constant in life and business that impacts everything. The drivers of change—societal, technological, economic, environmental, and geopolitical—are creating unprecedented challenges for organizations and CPAs alike.

The role of CPAs is also evolving to address the constant change. CPA Canada is developing resources in the form of management accounting guidelines (MAGs)—which provides guidance on how to implement a particular strategic or operational activity in your organization. The MAGs are meant to provide strategic insight into the competency areas of strategy, risk, financial, performance, and professional and leadership skills (with an overarching theme of emerging business issues and needs), along with the associated impacts, risks and opportunities for the business and accounting professional of today and tomorrow.

The MAGs are suitable for business and accounting professionals as they embark on their professional development journey. Such guidance is relevant in ensuring both professionals and organizations are resilient, adaptive, and innovative, creating sustainable enterprises.

That appears to be a more prescriptive approach than what had been used at CMA Canada.

Here is a listing of the various ones that have been released under this page:

Strategy management

• Strategic partnerships - overview, guideline and case studies
• Strategy mapping - overview, guideline and case study 1 and 2

Financial management and financial reporting

• Future value drivers - overview, guideline and case studies
• Finance and accounting outsourcing - overview and guideline

Performance management and measurement

• The CAM-I performance management framework: How to evaluate and improve organizational performance - overview and case study
• A practical approach to managing risks for small- to medium-sized organizations - guideline and case study
• The CAM-I risk value curve: Understanding your risk appetite to create value - guideline
• Performance measurement for non-profit organizations - overview, guideline and case studies
• Business model design - overview, guideline and case study 1 and 2
• Process-based management - overview, guideline and case study 1 and 2
• Scenario planning - overview, guideline and case studies

There's more...

However, there are other guidelines that do not appear on that list, but are identified as such elsewhere on the website. A simple site search revealed them, which suggests that there is rather poor maintenance going on there:

• Cybersecurity from the inside out: guideline and case study
• Divestitures: overview, guideline and case study
• From data to decisions: A five-step approach to data-driven decision making: guideline and case studies
• GHG emissions management: Linking strategy, risk, & performance management: guideline and case study
• Organizational change management: guideline and case study
• Rethinking organizational strategy: A value-focused approach to strategic planning: guideline and case study
• Using humanity to drive organizational change: guideline and case study

What's new, and what has been carried forward?

Most of CPA Canada's releases appear to be new work, but the following appears to be carried forward from CMA Canada:

• "Finance and accounting outsourcing" appears to be a simplification of the original Outsourcing the finance and accounting functions issued jointly by CMA Canada, CIMA and AICPA
• "Organizational change management" appears to be an expansion of Organizational restructuring (MAG10)
• "Process-based management" is based on "Implementing process based management in organizations". Sadly, I can't seem to find a PDF file of the original guideline.
• "Strategic partnerships" appears to be an elevation from Strategic partnering, CMA Emerging Issues Paper 8
• "Strategy mapping" appears to be based on Using strategy maps to drive performance 

Going forward...

That leaves a lot of CMA Canada's original work somewhat in limbo for the newer members of the profession. However, the rule has always been that guidance is in effect until it has been formally revoked. In fact, it is a statutory requirement for CPA Québec that such guidance must be followed:

19.0.1. The management accounting standards generally accepted in the profession are those set out in the Management Accounting Guidelines of the Society of Management Accountants of Canada.

When a member deviates from one of the guidelines, the member must, to the extent possible, refer to authoritative literature and indicate the deviation.

CPA Ontario does not have that stated explicitly, but the CPA Ontario Code of Professional Conduct does state in Rule 203:

A member shall sustain professional competence by keeping informed of, and complying with, developments in professional standards in all functions in which the member provides professional services or is relied upon because of the member’s calling.

That would appear to cover the field with respect to having to be aware of the extent of a member's obligations. It is rather broad.

What appears to be still valid, on which CPAs must still have regard during the course of their duties in management accounting? The following appears to be the case:

• From the original sequence of guidelines issued to 1999, MAGs 2, 3, 4, 6, 7, 12, 18 and 24 have not been replaced
• The 2002-2005 Management Accounting Standards are still in effect
• The 2005-2006 series of guidelines has not been replaced
• The 2007-2012 work done in conjunction with CIMA and AICPA, to the extent it has not been reissued by CPA Canada, is still in place
• The guidelines issued by CPA Canada

It appears that CPA Canada still has a lot of work to do to incorporate all of this on its website, as links to the sites of the legacy organizations no longer exist.

The CMA Body of Knowledge

CMA Canada did a great job of consolidating and streamlining the practice of management accounting, but little of it appears to be available on the CPA Canada website, and no credit is given to the previous work done. Fortunately, I still have all the hard copy in the Management Accounting Practices Handbook that was issued starting in the mid-90s, and PDF files of many of the issues were issued in 2005-2006, together with the publication of Management Accounting Standards.

I will go through and list all the guidelines, issues papers and standards that were issued up to 1998. As far as I know, none of these has ever been revoked.

Management Accounting Guidelines

The MAG Statement of Purpose and Operation describes their intent thus:

Management Accounting Guidelines are designed to be an authoritative source which identifies the relevant information required to arrive at rational decisions. Where alternative techniques or procedures are available to implement decisions and policies, the guidelines will recommend the preferred practice in given circumstances.

There were 48 MAGs issued in total:

1. Post Appraisal of Capital Expenditures
2. Estimating Cash Flows for Capital Expenditure Decisions
3. Framework for Internal Control
4. Estimating the Discount Rate for Capital Expenditure Decisions
5. Cash Management
6. Foreign Currency Risk Management
7. Managing the Annual Financial Statements Audit
8. Accounts Receivable Management
9. Strategic Planning for Information Resource Management
10. Organizational Restructuring
11. Selecting the Optimum Product Line for an Enterprise
12. Pension Plan Management
13. Managing Banking Relations
14. Managing Quality Improvements
15. Human Resources - Accountability
16. Implementing Benchmarking
17. Implementing Activity-Based Costing
18. The Design of Executive Incentive Compensation Plans
19. Implementing Just-In-Time Production Systems
20. Information Systems and Services Management - Accountability
21. Implementing Business Process Redesign
22. Becoming a Time-Based Competitor
23. Outsourcing Information Systems
24. Implementing Electronic Data Interchange
25. Becoming ISO 9000 Registered
26. Implementing Workplace Flexibility
27. Distribution Channels Management - Accountability
28. Implementing Target Costing
29. Product Life Cycle Management
30. Managing Cross-Functional Teams
31. Developing Comprehensive Performance Indicators
32. Building Buyer-Seller Partnerships
33. World Class Research & Development Management
34. Managing the Human Aspects of Organizational Change
35. Tools and Techniques for Effective Benchmarking Studies
36. Monitoring Customer Value
37. Implementing Corporate Environmental Strategies
38. Implementing Self-Directed Work Teams
39. Developing Comprehensive Competitive Intelligence
40. Tools and Techniques of Environmental Accounting for Business Decisions
41. Value Chain Analysis for Assessing Competitive Advantage
42. Measuring the Cost of Capacity
43. Redesigning the Finance Function
44. Measuring and Managing Shareholder Value Creation
45. Understanding and Implementing ISO 14000
46. Implementing Ethics Strategies Within Organizations
47. Implementing Process Management: A Framework for Action
48. Building a Data Warehouse

International Management Accounting Practices

The International Federation of Accountants has issued several practice statements that aim to harmonize certain concepts in use:

1. Management Accounting Concepts
2. The Capital Expenditure Decision
3. Currency Exposure and Risk Management
4. Management Control of Projects
5. Managing Quality Improvements (essentially an adoption MAG 14)
6. Post Completion Review
7. Strategic Planning for Information Resource Management (essentially an adoption of MAG 9)

Management Accounting Issues Papers

The MAIP Statement of Purpose explained the rationale as follows:

Issues Papers provide information about "leading edge" management processes and management accounting practices.

Issues Papers also provide an opportunity to stimulate informed debate on some of the more provocative questions that organizations should be aware of or must contend with in their day-to-day operations.

There were 16 papers issued in total:

1. Accounting for the environment
2. The role of management accounting in electronic data interchange
3. Activity-based costing
4. Virtual corporations - How real?
5. Management control systems in excellent Canadian companies
6. Agile competition: The emergence of a new industrial order
7. Benchmarking: A survey of Canadian practice
8. Strategic partnering
9. Electronic commerce
10. Activity-based management
11. Improving shareholder wealth
12. Measuring the impact of diversity
13. Codes of ethics, practice and conduct
14. Accounting for sustainable development: A business perspective
15. Corporate governance: The role of internal control
16. The management of intellectual capital: The issues and the practice

Management Accounting Standards

During 2002-2006, Management Accounting Standards were issued, and numbered in the same manner as those in the CICA Handbook. No consolidated PDF was issued at the time, but I have compiled one from the files I have:

The major sections were:

• 2000: Cost finding
• 3000: Cost using
• 4000: [Not used]
• 5000: Strategic performance measure and process control
• 6000: Management control
• 7000: Information technology
• 8000: Change management
• 9000: Stakeholder reporting

The standards are prescriptive only in the sense where they advise what techniques and procedures not to use. CMA Canada expressed their purpose in these words:

One of the most important developments in the evolution of Strategic Management Accounting has been the notion that organizations can develop different cost information for different decisions.

These Standards are intended to support this fundamental principle as their purpose is twofold:

1. To review common practice alternatives and discuss the relative merits of each. The intent is not to regulate, prescribe, or otherwise impose a uniform style of management accounting. Rather, the purpose is to identify which of the possible practice alternatives will best meet the needs, and advance the strategic objectives or competitive interests, of a particular organization in a particular setting.
2. There are contractual settings where resources are exchanged or decisions are made based on cost information. Examples include cost-plus reimbursement contracts, insurance claims that require property valuations based on cost, predatory pricing disputes that require a comparison between market price and cost, and regulatory environments where allowed prices are based on cost. When parties enter into a contract using cost measures, there is a need for cost standards and generally accepted definitions to insure that there are reasonable methods available for computing and defining costs that both parties understand and accept. In this sense, the role of these standards is to eliminate alternatives that are clearly unacceptable in order to provide a set of reasonable and well-defined alternatives to the contracting parties.

Recasting of guidelines and papers

In 2005-2006, most of the guidelines were converted into PDF format and organized into various categories. They were not numbered as in the previous hard-copy series.

In this table, those carried over from the previous hard-copy versions are cross-referenced and identified in italics. Those ones that are new to the series are identified in bold.

Category	Guidelines	Issues papers
Change management	Human resources - accountability (MAG15) Implementing self-directed work teams (MAG38) Implementing workplace flexibility (MAG26) Managing cross-functional teams (MAG30) Managing the human aspects of organization change (MAG34) Organizational restructuring (MAG10)	Collaborative innovation and the knowledge economy Measuring the impact of diversity (IP12) Measuring knowledge assets
Customer and supply chains	Becoming ISO 9000 registered (MAG25) Building buyer-seller partnerships (MAG32) Customer profitability analysis Distribution channels management - accountability (MAG27) Monitoring customer value (MAG36) Selecting the optimum product line for an enterprise (MAG11) Value chain analysis for assessing competitive advantage (MAG41) World-class research and development management (MAG33)	Strategic partnering (IP8) Virtual corporations - How real? (IP4)
Information technology	Building a data warehouse (MAG48) Information systems and services management - accountability (MAG20) Outsourcing information systems (MAG23) Strategic planning for information resource management (MAG9)
Management control	Implementing ethics strategies within organizations (MAG46) Post appraisal of capital expenditures (MAG1)	Codes of ethics, practice and conduct (IP13) Corporate governance: The role of internal control (IP15)
Strategic cost management	Adopting and implementing shared services Becoming a time-based competitor (MAG22) Business continuity management Developing comprehensive competitive intelligence (MAG39) Identifying, measuring and managing organizational risks for improved performance Implementing activity-based costing (MAG17) Implementing benchmarking (MAG16) Implementing business process redesign (MAG21) Implementing just-in-time production systems (MAG19) Implementing process management: A framework for action (MAG47) Implementing target costing (MAG28) Measuring the cost of capacity (MAG42) Redesigning the finance function (MAG43) Tools and techniques for effective benchmarking studies (MAG35)	Agile competition: The emergence of a new industrial order (IP6) Next generation enterprise
Strategic performance measurement	Applying the balanced scorecard Developing comprehensive performance indicators (MAG31) Evaluating performance in information technology Managing quality improvements (MAG14) Measuring and improving the performance of corporate boards Product life cycle management (MAG29)	The management of intellectual capital: The issues and the practice (IP16)
Stakeholder reporting	Implementing corporate environmental strategies (MAG37) Measuring and managing shareholder value creation (MAG44) Tools and techniques of environmental accounting for business decisions (MAG40) Understanding and implementing ISO 14000 (MAG45) Writing and evaluating sustainable development and environmental reports	Accounting for sustainable development: A business perspective (IP14) An executive view of shareholder value creation: Determinants of success in publicly held Canadian organizations Improving shareholder wealth (IP11)
Treasury management	Accounts receivable management (MAG8) Cash management (MAG5) Financial risk management Managing banking relations (MAG13) A strategic role for treasury

From the cross-referencing, it is apparent that the following guidelines and papers were not incorporated into the new series, and there is no indication that they have been formally withdrawn:

• MAGs 2, 3, 4, 6, 7, 12, 18 and 24
• IPs 1, 2, 3, 5, 7, 9 and 10

After that round of consolidation, other guidelines were issued from that time until the CPA merger. Only some of them have since been reissued by the new body. In late 2011, CMA Canada published a list of these MAGs in its magazine:

Group	Title
Issued jointly with CIMA and AICPA	Designing and implementing a performance measurement system (2010) Environmental sustainability: Tools and techniques (2009) Evaluating the effectiveness of Internet marketing initiatives (2007) Evaluating performance in information technology (2005) Evidence-based decision making: Using business intelligence to drive value (2009) Impacting future value: How to manage your intellectual capital (2008) Integrating social and political risk into management decision-making (2007) Managing customer value (2007) Managing opportunities and risks (2008) Outsourcing the finance and accounting functions (2007) Strategic management of information for boards (2007) Supply chain management accounting (2009) The reporting of organizational risks for internal and external decision-making (2006) Using strategy maps to drive performance (2007)
Reissued by CPA Canada (original and reissue dates)	Divestitures (2009; 2018) Divestitures: Applying a five-step process (2012; 2018) From data to decisions: A five-step approach to data-driven decision making (2012; 2020) Future value drivers: Leveraging your intangible assets using a five-step process (2012; 2018) Performance measurement for non-profit organizations: The balanced scorecard as an approach (2009; 2016) Process-based management: A four-phase approach to improve organizational efficiency and effectiveness (originally issued as "Implementing process based management in organizations", 2009; 2018) Scenario planning: Plotting a course through an uncertain world (2010; 2018) Scenario planning: Applying a six-step process to your organization (2010; 2018)

The framework after the CPA Canada merger

It was a challenge to get this far. I thank Worldcat for finding out about all the guidelines and papers that were issued.

As for the current structure, the CPA Canada website is totally unhelpful in determining what exists now. Even running a web search of the site does not reveal the total picture. The guidelines that do exist are broken down between overviews, guidelines and related case studies, and there is no announcement when something new has been issued. That is extremely different from what had been the case before, when master lists of the publications were on the CMA Canada site, and members were given USB sticks at meetings that had the complete rundown of what had been issued to date. Before that, the members were mailed hard copies of the publications, and binders to keep them in. I still have all mine!

I will attempt to give a listing, together with hyperlinks, to what exists now. That will be in a separate post.

A look back at a long-gone and hated tax

I had forgotten that last year was the 30th anniversary of the introduction of the Goods and Services Tax (GST) in Canada, and the fact that it replaced the increasingly bizarre and convoluted Federal Sales Tax (FST). Very little has been written about the FST's history since that time, and to date it has not even merited its own article on Wikipedia. Perhaps this will help shed some light on how that tax came into being, and how it operated.

It was introduced on a limited scale on 1 May 1918, when the Special War Revenue Act (originally passed in 1915) was amended to impose a 10% war excise tax on (a)  the duty-paid value of specified goods imported into Canada, and (b) the initial selling price of such goods that were manufactured in Canada. The goods on which the tax was imposed were:

• automobiles for passenger use
• records and cylinders, and their players
• mechanical pianos and organs, and records for them
• jewelry, both real and imitation

 On 19 May 1920, this was expanded through the addition of various taxes on luxury goods, plus a sales tax (subject to various exemptions) of:

• 1% on "sales and deliveries by manufacturers and wholesalers, or jobbers, and on the duty-paid value of importations", and
• 2% on "sales by manufacturers to retailers and consumers, or on importations by retailers or consumers".

 Provision was also made for the eventual introduction of an annual licence requirement on all manufacturers and wholesalers.

On 10 May 1921, the rates were revised:

• 1.5% on "sales and deliveries by manufacturers and producers, and wholesalers or jobbers",
• 2.5% on "the duty-paid value of goods imported",
• 3% "in respect of sales by manufacturers to retailers or consumers", and
• 4% "on goods imported by retailers or consumers ... for the purpose of resale ... on the duty-paid value".

 On 1 January 1924, the following changes took place:

• a single rate of 6% was instituted for all subject goods (as noted above),
• every manufacturer or producer who manufactured or produced goods worth ten thousand dollars or more during any fiscal year ending 31 March (beginning with the one in 1923) was required to obtain an annual licence for collecting the tax,
• every wholesaler or jobber "who sells not less than [50%] of his total sales of goods to a licensed manufacturer or producer, to be used in, wrought into or attached to articles to be manufactured or produced for sale" had the option to apply for a sales tax licence, and
• licensed manufacturers and producers were entitled to deduct the tax they paid on imported goods that were subsequently sold to another licensed manufacturer or producer, from the tax otherwise payable on sales made of their own goods, and
  
• licensed wholesalers were entitled to claim back tax they had paid on sales of similar goods.
  

In 1938, the fiscal year requirement with respect to sales by wholesalers and jobbers exceeding the 50% threshold was revised to the proportion of such such sales occurring during the three months immediately preceding such application. In 1958, the sales threshold for manufacturers and producers was repealed, and all were required to obtain a licence.

In 1947, the Special War Revenue Act was renamed as the Excise Tax Act, and the sales tax became known as the consumption or sales tax.

By the time that the Revised Statutes of Canada, 1970 came into force, the general framework was as follows:

• the general rate was 9%, with separate rates of 3% for goods produced by the blind and 8% for building materials and heating equipment;
• the tax was imposed on
• goods manufactured or produced in Canada, payable on delivery or when title passed (whichever came first)
• goods imported into Canada, payable on importation or upon later withdrawal from a bonded warehouse for consumption
• sold by a licensed wholesaler, and the tax was calculated on the duty-paid value (if imported) or otherwise on the price paid by him
• goods where kept for the licensee's own use, or for rental, as the case may be
• the following sales were tax-exempt:
• partly manufactured goods sold by a licensed manufacturer to another licensed manufacturer
• partly manufactured goods imported by a licensed manufacturer
• goods imported by a licensed wholesaler other than for his own use or for rental to others
• goods sold by a licensed manufacturer to a licensed wholesaler other than for his own use or for rental to others
• partly manufactured goods sold by a licensed wholesaler to a licensed manufacturer
• goods sold by a licensed wholesaler to another licensed wholesaler (but a recovery of tax was in effect where the sale price was less than the original duty-paid value or purchase price)
• there was also an extensive list of goods that were tax-exempt under all circumstances

As you can see, the scheme was quite complex, calling for extensive recordkeeping and extensive proof that vendors and purchasers had the proper licences to track both liability and exemption. This could be difficult, as there was no central registry of licence numbers to consult, and it was up to the purchasers to supply proof. Needless to say, there was ample scope for fraud, and the FST auditors found that to be a fruitful ground for reassessment.

The manufacturer's and wholesaler's licences were respectively known as S and W licences. Tax reported under S licences was netted against revenues, while those under W licences were added to the cost of sales. Manufacturers had the option of quoting prices either tax-included or tax-extra, which led to some rather sophisticated sales analysis reporting. I had the privilege of analyzing such reports in my first job after graduating from college. That was back in the days of reviewing monthly 11" x 17" flatpack reports that were regularly 3" thick, and internal office copies of invoices that showed the effect of netting the FST back to taxable items, or identifying the amount of FST that could be claimed back on imported goods. Our current accounting systems in Canada have nothing like this in effect now.

That type of internal reporting was essential, because of the tyranny wrought by the Customs & Excise auditors in charge of reviewing the FST returns. They were extremely aggressive, and there was little opportunity to appeal against their rulings. No wonder that none of them were given the opportunity to  become GST auditors when the new tax came into effect in 1991!

The new GST, in comparison, can be said to be a self-enforcing tax, as it is in effect a tax on markup, and it covers both goods and services supplied (subject to a list of exempt or zero-rated items). There is also a central registry of Business Numbers available for verification purposes. The results are easily exported into PDF for purposes of recordkeeping on the local ERP system. Accountants these days don't realize how easy their jobs are!

A reconstitution of some corporate history

A while back on my other blog on Wordpress, I did some reminiscing about a company I worked at back in the early 1980s. You can read those remembrances here and here. I was looking at them recently, and had to do some repairs on some items that have undergone linkrot over the years. I also decided to do some checking to see what has happened to that place in the ensuing years.

I knew that Ford Motor Company had sold its glass manufacturing operations to Asahi Flat Glass (AFG), which is now called AGC. I wondered how the evolution took place, and decided to do some checking. Fortunately, Industry Canada has the complete history of all corporations formed or continued under the Canada Business Corporations Act. That really helped, and I was able to reconstruct all the various movements into this PDF fiIe, complete with hyperlinks to all the various entries:

There are some caveats to this timeline:

• For one year, AFG migrated to Ontario before returning to the CBCA. There may have been other corporate activity going on during that time, but Ontario doesn't allow free access to their files in order to verify that.
• I personally know that Glaverbel Glass Ltd was the subject of extensive amalgamation activity under the previous Canada Corporations Act, but those files are not online. As well, Glaverbel (as well as its successor Canadian Glass Industries Ltd) had a Québec subsidiary (Verrerie Charlebois Inc) that was wound up with all its assets and liabilities being conveyed to CGIL. That was done as Québec company law did not allow for a more straightforward continuance to another jurisdiction at the time.
• Glaverbel was also a minority owner in National Glass Ltd out in BC, but that was sold off in 1980-81.
  
• The first Ford Glass Ltd began its existence back in the 1920s as Pilkington Brothers (Canada) Ltd. It took on the Ford name after Pilkington plc disposed it to Ford Motor Company in 1981.
• In a similar fashion to Glaverbel, Pilkington acquired a large network of local glaziers across Canada that have since been disposed of. It is unclear whether this chain of acquisitions was undertaken as asset purchases or amalgamations or both, but previous corporations laws were probably involved, and the records are probably still just on paper.
• The later Glaverbec entry is interesting, as it appears to have been an attempt by the original Belgian Glaverbel parent to take up an interest in a glass mill that AFG set up at Saint-Augustin-de-Desmaures near Québec City. It has since been shut down and repurposed by an appliance manufacturer, after Glaverbel was acquired by Asahi.

If anyone can undertake further research in the older corporate archives to take this further, I'm sure it would be very revealing.

The future is coming, whether we want it or not

Yesterday's Globe and Mail had two especially contrasting items in the Report on Business:

• a six-page announcement from CPA Ontario congratulating the new cohort of graduates (news that is sadly lacking on its own website)
• a column in the careers section on the future job paths for non-STEM graduates

As always, I congratulate the new grads and wish them well. However, they may find it worthwhile to dig a big more in the second article. It refers to The Future of Jobs Report 2018 issued by the World Economic Forum, which reveals much more than the Globe column alludes to.

For example, on page 9 it gives risk profiles to certain categories of jobs:

Stable roles	New roles	Redundant roles
Managing Directors and Chief Executives General and Operations Managers* Software and Applications Developers and Analysts* Data Analysts and Scientists* Sales and Marketing Professionals* Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products Human Resources Specialists Financial and Investment Advisers Database and Network Professionals Supply Chain and Logistics Specialists Risk Management Specialists Information Security Analysts* Management and Organization Analysts Electrotechnology Engineers Organizational Development Specialists* Chemical Processing Plant Operators University and Higher Education Teachers Compliance Officers Energy and Petroleum Engineers Robotics Specialists and Engineers Petroleum and Natural Gas Refining Plant Operators	Data Analysts and Scientists* AI and Machine Learning Specialists General and Operations Managers* Big Data Specialists Digital Transformation Specialists Sales and Marketing Professionals* New Technology Specialists Organizational Development Specialists* Software and Applications Developers and Analysts* Information Technology Services Process Automation Specialists Innovation Professionals Information Security Analysts* Ecommerce and Social Media Specialists User Experience and Human-Machine Interaction Designers Training and Development Specialists Robotics Specialists and Engineers People and Culture Specialists Client Information and Customer Service Workers* Service and Solutions Designers Digital Marketing and Strategy Specialists	Data Entry Clerks Accounting, Bookkeeping and Payroll Clerks Administrative and Executive Secretaries Assembly and Factory Workers Client Information and Customer Service Workers* Business Services and Administration Managers Accountants and Auditors Material-Recording and Stock-Keeping Clerks General and Operations Managers* Postal Service Clerks Financial Analysts Cashiers and Ticket Clerks Mechanics and Machinery Repairers Telemarketers Electronics and Telecommunications Installers and Repairers Bank Tellers and Related Clerks Car, Van and Motorcycle Drivers Sales and Purchasing Agents and Brokers Door-To-Door Sales Workers, News and Street Vendors, and Related Workers Statistical, Finance and Insurance Clerks Lawyers

Roles that are marked with an asterisk (*) appear in multiple columns, and their future is industry-dependent. However, the key takeaway I see for my profession is that almost all of its traditional roles are identified as being, or becoming, redundant. That should be disconcerting for everyone, as this means that all traditional career paths for a CPA are now in question.

What types of skillsets will be in demand in the near future? On page 12, there's a table that attempts to identify certain "top 10" lists to consider:

Comparing skills demand (Top 10 areas), 2018 vs 2022
Today, 2018	Trending, 2022	Declining, 2022
Analytical thinking and innovation Complex problem-solving Critical thinking and analysis Active learning and learning strategies Creativity, originality and initiative Attention to detail, trustworthiness Emotional intelligence Reasoning, problem-solving and ideation Leadership and social influence Coordination and time management	Analytical thinking and innovation Active learning and learning strategies Creativity, originality and initiative Technology design and programming Critical thinking and analysis Complex problem-solving Leadership and social influence Emotional intelligence Reasoning, problem-solving and ideation Systems analysis and evaluation	Manual dexterity, endurance and precision Memory, verbal, auditory and spatial abilities Management of financial, material resources Technology installation and maintenance Reading, writing, math and active listening Management of personnel Quality control and safety awareness Coordination and time management Visual, auditory and speech abilities Technology use, monitoring and control

Looking back on past CMA training (and I believe the same holds for current CPA training), we have certainly acquired skills in nine out of the ten trending areas (EQ falling under on-the-job training), while our classical seating in #3, 6 and 10 on the last list is on the wane. That will definitely call for reskilling over and above our traditional CPD, and this report (at page 13) identifies the size of the task that needs to be confronted:

• by 2022, no less than 54% of all employees will require significant reskilling or upskilling
• of that amount, 35% need to undergo additional training of up to six months; 9% for 6-12 months, and 10% will require additional skills training of more than one year!

Are we up to this task here in Canada, given Canadian employers' traditional aversion to training in-house? The WEF report is not encouraging to begin with, as it also states that "those most in need of reskilling and upskilling are least likely to receive such training." If that is a worldwide assessment, I can foresee a large wave of forced retirements coming down the pipeline (as that would be seen to be the cheaper option). At the very least, it will be a contradictory message to the whining our businesses are making now in complaining about not being able to hire candidates with the skills they need.

Stay tuned. It will be really interesting to see what develops.

Further, crucial thoughts on Morneau's CCA proposals

There will be further commentary about Morneau's fall economic statement this week, but fuzzy  accusations are already being posted about their effectiveness. For instance, Jack Mintz raised the following point in the Financial Post:

"As it stands, about three-fifths of Canadian corporations do not pay corporate taxes, according to the Canada Revenue Agency’s recent corporate tax statistics (a breakdown by sector or size of companies is not available)."

 While he does give an important qualification, he doesn't necessary point out that many corporations required to file returns are automatically exempt from income tax liability, including:

1. Charities and other non-profit corporations
2. Federal and provincial Crown corporations
3. Municipally-owned corporations
4. Bare trustees whose only purpose is to hold property on behalf of another individual or entity
5. Dormant and other inactive corporations

Why the CRA doesn't isolate those entities in its analysis does tend to make us wonder. I would also add the following groups for consideration, based on person observation:

1. Holding companies that act as trustees for trusts whose income flows directly to beneficiaries
2. Management companies whose expenses are offset by management fees charged to related parties

It's up for debate as to whether the underlying arrangements for these companies are legally valid, but that is a topic to be debated another time, especially as to why the CRA is not as aggressive as it should be in questioning them.

The current debate is as to whether the new measures for accelerated capital cost allowance will help to boost the economy. I am skeptical as to whether that will happen, because Canadian businesses have been historically notorious for underpaying and underinvesting:

• For these past decade, the cost of capital has been at historical lows, which would have made borrowing for business investment correspondingly cheap. Coupled with capital cost incentives that were much more attractive than their US equivalents, and given the economists' teaching that any project having a return greater than the cost of capital should be undertaken, we should have seen significant uptakes in investment. That, however, has not been the case.
• Even before that, when the Canadian dollar achieved temporary parity with the US dollar, we should have seen significant imports of capital equipment to upgrade our under-performing manufacturing plants. That did not happen either.
• We witnessed the existence of dead money, where corporations just sat on their cash instead of investing it.
• We have witnessed a massive waste of energy by business lobbies in promoting the concept that lower corporate tax rates will increase productivity, whether through the general rate or the small business rate. That hasn't worked either, because we have seen businesses using their improved cash flow to buy back their shares instead. That may very well be linked to the above point about dead money, but I have heard of no analysis published in that regard.
• As for the small business rate break, the UK abolished its small profits rate in April 2015, because it became quite obvious that it is an incentive to stay small, while Australia introduced a gross revenue test (subject to certain passive income limitations) in July 2017 to bypass the games corporations play to minimize their taxable income to qualify for the break.

In addition, there has always been an over-conservative tradition in Canadian business when it comes to investing. The first employer I worked for after graduation in the 1970s had an effective policy of only approving projects with a payback of less than a year, which really halted a lot of potential investment. I remember a financial analysis supervisor that wrote up a mock appraisal for acquiring an electrical pencil sharpener, and I believe she was able to justify it on the basis of an annualized rate of return of 3,078%! Another employer later on used a hurdle rate of 15% to identify projects that would make the cut for a formal appraisal. As that was an after-tax rate, even at a time when bank rates were around 20%, the tax rate of around 50% would still have made for an after-tax rate of about 10%, and the financial analysts there were wondering why a higher rate was being applied for projects that were essentially risk-free.

The new CCA rules, explained

All the hype over Bill Morneau's fall economic statement yesterday was really overdone, but, once you look into the details, many questions remain. I won't discuss the macroeconomic and political issues, as they are being fully debated elsewhere. I will, though, expand on my initial thoughts about the changes to the capital cost allowance rules, because they are more complex than were originally described.

Recap

As most CMAs will recall from their training, the NPV of capital investment for the regular declining-balance classes in Schedule II of the Income Tax Regulations is determined through two calculations:

Full-year rule

$ I  \left (1-\frac{td}{i+d}\right ) $

Half-year rule

$ I \left [ 1-\left (\frac{td}{i+d}\right )\left (\frac{1+\frac{1}{2}i}{1+i}\right ) \right ] $

The new accelerated investment incentive rules

Morneau's proposals essentially displace the half-year rule for selected groups of assets, but the much advertised touting of these as providing 100% writeoffs for capital investment are not really that simple. We have to look at how the computations are expressed, and they ain't pretty.

First of all, under the current Notice of Ways and Means Motion,

• property acquired after 20 November 2018 (excluding property previously owned by the taxpayer or by another entity with whom the taxpayer does not deal at arm's length, whether by rollover or otherwise) that becomes available for use before 2028 is now identified as "accelerated investment incentive property", and
• the capital cost allowance prescribed rates are now multiplied by the following adjusted acquisition values:

$ ab + cd + ef + gh + 0.5i  $

all of which are described in the table below:

Group	CCA Class	Factor		Description
$ ab  $	not in respect of property included in ITR 1100(1)(v) (ie, a Canadian vessel) or in any of Classes 12, 13, 14, 15, 43.1, 43.2 and 53	$ a  $		0.5, in respect of property that becomes available for use before 2024, and 0, in respect of property that becomes available for use after 2023
		$ b = j - k  $	$ j  $	the total of all amounts that become available for use within the year
			$ k  $	the amount, if any, by which the amount determined for $ s  $ exceeds the amount determined for $ r  $ in the description of $ i  $
$ cd  $	Class 43.1 (ie, clean energy processing)	$ c  $		2 1/3, in respect of property that becomes available for use before 2024, 1 1/2, in respect of property that becomes available for use in 2024 or 2025, and  5/6, in respect of property that becomes available for use after 2025
		$ d = l - m  $	$ l  $	the total of all amounts that become available for use within the year
			$ m  $	same calculation as for $ k  $
$ ef  $	Class 43.2 (ie, certain clean energy processing equipment acquired before 2025 that would otherwise fall under Class 43.1)	$ e  $		1, in respect of property that becomes available for use before 2024, and 0.5, in respect of property that becomes available for use in 2024
		$ f = n - o  $	$ n  $	the total of all amounts that become available for use within the year
			$ o  $	same calculation as for $ k  $
$ gh  $	Manufacturing and processing equipment in Class 53 (if acquired before 2026) or Class 43 (if acquired after 2025)	$ g  $		1, in respect of property that becomes available for use before 2024,  1/2, in respect of property that becomes available for use in 2024 or 2025, and   5/6, in respect of property that becomes available for use after 2025
		$ h = p - q  $	$ p  $	the total of all amounts that become available for use within the year
			$ q  $	same calculation as for $ k  $
$ i  $	property subject to the half-year rule	$ i = r - s  $	$ r  $	the total of all amounts that become available for use within the year
			$ s  $	amounts received as proceeds of disposition for property

While the last factor is effectively the classic half-year rule computation, the other factors are essentially the top-up amount that will be added. They effectively lead to the following composite results:

1. Unless otherwise provided elsewhere, the CCA first-year claim is calculated at 1.5 times the standard rate for assets becoming available for use before 2024, after which the full-year rule will apply for assets becoming so before 2028, and then reverting back to the half-year rule thereafter.
2. For Class 43.1, the CCA first-year rate becomes 100% for assets available for use before 2024, 75% for those becoming so in 2024 or 2025, and 55% for those becoming so after 2025.
3. For Class 43.2, the CCA first-year rate becomes 100% for assets available for use before 2024, and then 75% for those assets becoming in 2024.
4. For Class 53 and Class 43 assets (depending upon the date they come into use),  the CCA rate becomes 100% for assets available for use before 2024, 75% for those becoming so in 2024 or 2025, and 55% for those becoming so after 2025.
5. The half-year rule continues to apply for those assets that do not qualify as "accelerated investment incentive property".

Therefore, the formula I was posting yesterday for calculating the effective tax shields on the new accelerated rates, being:

$ I \left [ 1-\left (\frac{td}{i+d}\right )\left (\frac{1+bi}{1+i}\right ) \right ] $

can be used as appropriate, after taking into account the appropriate top-up factors outlined above.