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I live in Canada, and run a small hobby website (under a sole proprietorship) which earns advertising revenue from various sources. Some of that is paid in CAD, some in USD, and some in EUR, etc.

My questions are around when I should recognize the revenue, and how I should handle the currency conversion for tax purposes.

My Scenario:

One such income source, for example, is amazon.com associates program.

  • Earnings are "finalized" by amazon for a given month 60 days after the end of said month (e.g. to account for returns, etc.). For example, October 2019's earnings are finalized in December.
  • I also set payment thresholds on my account with them... meaning I don't get a check until my earnings reach a certain amount. This means I may not receive the funds until many months later. For example, in 2019 I received a check for revenue earned from jan-2018 to Nov 2019.
  • Funds are received in USD, and converted to CAD at the time of deposit into my business bank account, based on the bank's exchange rate on the date of deposit.

Some specific questions:

  1. Would I still recognize that revenue as earned in October?
  2. Due to the payment threshold, I may not get the funds until many months (sometimes > 12) after the funds have been earned. I assume that has nothing to do with when I recognize the revenue - correct?
  3. CCRA docs I've read suggest I should be using an exchange rate for the month the revenue was earned but because of the above, that may not be the actual exchange rate the funds are converted at. This can make a significant difference depending on how the rate fluctuates over time. How should I handle the exchange rate when reporting the revenue for CCRA tax purposes?
  • 1
    Are you working on a cash or accrual basis? – Luck Feb 27 at 16:47
  • Should have specified that this is for CCRA reporting purposes, so I believe accrual-based is what is required for this application. – GWR Feb 27 at 21:41

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