Innovation is key area as part of both productivity and expanding opportunities for business. Innovation is also a risky area as if poor decisions are made in terms of development then those could lead to issues product quality.

1. Is Canada on the path to
innovation success?
Paul Young CPA, CGA
March 26, 2017

2. Paul Young – Bio
• CPA, CGA
− 26+ years of Corporate Finance and Business
Solutions
− 17+ years in corporate finance and reporting
− 11+ years of analyzing government policies
− Blogger – Financial, Economic and Business Trends
− 8+ years in academia
• Advance Accounting
• Advance Management Information System
• Public Finance
• Advance Finance
• Audit Risk and Controls

3. Agenda
• What is innovation?
• Defining innovation
• Accounting for innovation
• Tax Treatment / Canada
• Tax Treatment / USA
• How to handle R&D?
• R&D / Canada - Trends

4. What is innovation?
• The process of translating an idea or invention into a good or
service that creates value or for which customers will pay.
To be called an innovation, an idea must be replicable at an
economical cost and must satisfy a specific need. Innovation
involves deliberate application of information, imagination
and initiative in deriving greater or different values from
resources, and includes all processes by which new ideas are
generated and converted into useful products. In business,
innovation often results when ideas are applied by the
company in order to further satisfy the needs and
expectations of the customers. Source -
http://www.businessdictionary.com/definition/innovation.ht
ml

5. Defining Innovation
• Innovation can mean different things to
different people
− Productivity improvements
− New product
− New product enhancements

6. Accounting for innovation
Source - https://www.bdo.ca/getattachment/7cf1499b-
bbd3-44e8-8c35-26f8f30d5ac1/attachment.aspx/
Accounting Standards
• IAS 38 (IFRS)
• FASB (SFAS-2)

7. Tax treatment – R&D – Canada
• Source – Deloitte and Touche

8. Tax treatment – R&D – USA
• Source – Deloitte and Touche

9. How to handle R&D
• It is best to reach out to large firms like
PWC, Deloitte, Ernst & Young, BDO and
KPMG as part of your R&D filings
• You many also want to reach out to all
levels of government as part of accessing
research grants
• You may also want to build reporting
model/solution using analytics -
http://www-
03.ibm.com/software/products/en/plann
ing-analytics

10. Fast growing Companies/Canada
Source - http://www.profitguide.com/manage-grow/success-stories/2016-profit-500-facts-
about-canadas-fastest-growing-companies-107201
• Many new companies start either via University/College students or people
working in a particular industry
• Initial startups have to raise capital to fund their business, i.e. investors
• The fast pace of development, especially in areas like IT have allow
companies move ideas from incubation to market.
• There are many research hubs across Canada that were spawn by work
done at either university or colleges

11. Federal Government / Canada
• Main focus is clean technology
− Clean technology is $50B business in
Canada
• SDTC -
https://www.sdtc.ca/en/portfolio/project
s
• Many innovation funds available for
companies -
https://www.slideshare.net/paulyoungcga
/federal-government-programs-to-support-
innovation-and-business

12. Comment / IT World
• Source -
http://www.itworldcanada.com/article/budget-2017-a-
big-miss-on-innovation-opportunity/391737
IT World – March 24, 2017

13. Natural Resources/Canada
Source - http://samssa.ca/key-federal-
budget-2017-highlights-mining-innovation-
supply-service-support-perspective/
• Government put little emphasis on natural resources
• Natural resources are key component of finished goods for clean technology,
food, aerospace and automotive
• There are limited reserves in areas like vanadium, lithium and rare metals

14. Comment – Press Reader
Source - https://www.pressreader.com/canada/the-globe-and-
mail-bc-edition/20170324/281814283690971

15. Summary
• Innovation is key for Canada, especially
as part of growing/expanding the
economy
• Picking winners and losers is not the role
of government
• There needs to be clear map on how
moneys will flow from government as part
of maximizing the funds
• The government needs to focus all on
sectors not just a few sectors.