Overview: This Newsletter discusses accounting implications of the Canada Emergency Wage Subsidy under IFRS.
The Government of Canada recently introduced two wage subsidies to
help Canadians and businesses facing hardship as a result of the COVID-19
The Temporary 10% Wage Subsidy is a three-month measure that will
allow eligible small employers to reduce the amount of payroll deduction
required to be remitted to the Canada Revenue Agency (CRA). The bill received
Royal Assent and was brought into law on March 25, 2020.
The Canada Emergency Wage Subsidy (CEWS) introduces a wage subsidy
of up to 75% for qualifying businesses, for up to 3 months, retroactive to
March 15, 2020. The subsidy covers employers of all sizes and across all
sectors who have suffered a drop in gross revenues of at least 15% in March,
and 30% in April and May. The bill received Royal Assent and was brought into
law on April 11, 2020.
Employers eligible for the CEWS are also entitled to receive a
100% refund for certain employer contributions.
This In brief addresses the accounting implications of the
subsidies and the impact on reporting periods prior to April 2020.
In our view:
- The Temporary 10% Wage subsidy is accounted for as a government
grant from March 25, 2020 when it was brought into law;
- The CEWS is accounted for as a government grant from April 11,
2020 when it was brought into law;
- Accounting for payments to employees relating to the CEWS depends
on the arrangement between the employer and employee.
Changes to the subsidy programs or new arrangements introduced by
governments or employers may result in a different analysis.
Detailed guidance is available in our In brief.
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