Updated Checked by the Tax-Services.ca editorial team How we check
Restructuring costs go on your books when you owe them, not when you decide to cut. Under IFRS, a provision for restructuring is recognised only once the main features of a detailed plan have been announced to the people it affects. A plan sitting in a boardroom folder doesn’t count. We couldn’t confirm the matching ASPE wording, so private companies should check their own standard.
When can you record a restructuring cost?
IAS 37, the IFRS standard on provisions, is the clearest source. It says a restructuring provision arises when there’s a constructive obligation, and that happens when the main features of the detailed plan have been announced to those affected. It also separates restructuring from future operating losses, and the standard doesn’t let you provide for the second.
In plain terms, ask two questions. Is the plan detailed enough to say what’s being closed or cut, and roughly when? And have the affected people been told? If either answer is no, the cost isn’t ready to be booked as a liability.
Timing is where owners get caught. Say a manufacturer in Hamilton decides in November to close a shift, but the staff only hear in January. The year end falls in December. On the rule above, the announcement hadn’t happened by year end, so the cost isn’t a liability on that balance sheet. That feels backwards to a lot of owners, yet it’s what the test is for.
Which costs may be included is a longer discussion, and we haven’t verified it line by line. Read the standard itself, or ask your accountant, before you record anything like consulting fees or contract exit costs.
What do restructuring costs usually include?
The typical buckets are staff termination, write-downs of assets that won’t be used, and costs of ending contracts. Keep each one on its own line with the paperwork behind it. Auditors ask for support, and a single “restructuring” total makes that hard.
Employee payments are where the tax rules bite. Here are the ones the CRA spells out for payroll.
| Payment | CPP | EI | Income tax withheld |
|---|---|---|---|
| Retiring allowance (severance) | No | No | Yes |
| Vacation pay on termination | Yes | Yes | Yes |
So a severance cheque and a final vacation payout are treated differently, even when they go out on the same day.
What does a layoff cost in a real example?
Take an Ontario employee with 8 years of service earning $1,200 a week. The severance pay calculator gives the legal minimum as 8 weeks of notice or pay in place, which is $9,600. It shows $0 of statutory severance because the employer’s payroll is under $2.5 million.
That’s the floor. A court can award more notice, and a contract or a union agreement can promise more, so the figure you’d actually record may be higher. It’s also a good moment to check the final vacation payout with the vacation pay calculator.
Now the employee’s side. A payment above the minimum still needs correct withholding, and the bonus tax calculator is a reasonable way to see how a lump sum lands on top of other income, though it’s a stand-in and not a rule for severance.
For a ballpark across a team, multiply the single-employee floor by the number of people in similar roles, then adjust for years of service. If ten people each had 8 years at $1,200 a week, the minimum notice or pay in place would be $96,000 before any extras. Real numbers will vary, because every person’s service and pay differ.
Are restructuring costs deductible for tax?
We couldn’t confirm the tax treatment from an official page, so we won’t claim it. Whether a cost is a current expense or a capital one depends on what it was for, and the CRA’s general rule is that a reasonable current expense incurred to earn income is deductible. Accounting recognition and tax deduction are not always in the same year either.
If the cost is deductible, the effect can be seen with the corporate tax calculator. An Ontario private company with $300,000 of active business income pays $35,088 for calendar 2026. With $260,000, it pays $30,409.60. That’s $4,678.40 less, on a $40,000 cost, and the calculator covers associated companies and passive income only through optional boxes.
What should you gather before the year end?
Pull together the board minutes showing when the plan was approved, the date and wording of the announcement to staff, a list of affected roles with their pay and years of service, and any contract exit terms. With those four items on the table, your accountant can usually tell you in one sitting whether a provision belongs in this year or the next.
Where do companies get this wrong?
- Booking the whole cost when the board approves the plan, before anyone affected has been told.
- Providing for future operating losses, which the standard rules out.
- Mixing normal running costs into the restructuring line, so results look worse than they are.
- Treating severance like ordinary wages and deducting CPP and EI from it.
- Forgetting the notes. Users of the statements need to see what the restructuring was and what it cost.
This page gives a starting map and no more. Your framework, either IFRS or ASPE, decides the answer, and a professional accountant should sign off on a real provision.
How we checked the figures
The recognition rule comes from the IFRS Foundation’s summary of IAS 37. The CPP, EI and income tax treatment of payments comes from the Canada Revenue Agency‘s special payments chart, read in 2026. Severance and corporate tax figures use 2026 data built into this site’s calculators. No government body is connected to this website.
Frequently asked questions
When can I record a restructuring provision under IFRS?
When the main features of a detailed restructuring plan have been announced to those affected. A plan that hasn't been communicated isn't enough.
Can I book future operating losses as part of restructuring?
No. IAS 37 separates restructuring from future operating losses, and those can't be provided for.
Are CPP and EI deducted from severance?
The CRA's chart says no CPP or EI on a retiring allowance, but income tax is withheld. Vacation pay on termination does carry CPP and EI.
What does ASPE say about restructuring?
We couldn't confirm the ASPE wording, so check the standard your company reports under before you book a provision.
Are restructuring costs tax deductible?
We couldn't confirm that from an official page. It depends on what the cost was for, so ask your accountant.
All property and estate tax calculators
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill