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Accounting for supply chain disruptions in Canada comes down to three questions. Is your inventory still worth what you paid, can you keep operating for the next twelve months, and have you told the reader of your statements what changed?
Statistics Canada found in its third quarter 2025 survey that 37.3% of businesses said US tariffs hurt them, so these aren’t abstract worries. Picture Priya, who runs a small kitchenware importer in Mississauga. A container sits at port for six weeks, her replacement supplier charges a few bucks more per unit, and her year end is three months away. Her books need to catch up with that.
Is your inventory still worth what you paid?
Private enterprises measure inventory at the lower of cost and net realizable value, which is the net amount you expect to get from selling it in the ordinary course of business. That’s Section 3031 of ASPE. If the cost is no longer recoverable, you write the inventory down, and you test it again each later period.
FRAS Canada lists things that can trigger a write-down: obsolescence, falling selling prices and rising input costs. A disrupted supply chain can cause the last two quickly. A shipment that arrives late for a season, or a replacement supplier that charges more, both squeeze the gap between what you paid and what you can sell for.
A worked example with real numbers
Say you hold 1,000 units that cost $60 each, and the market price falls to $50. In the profit margin calculator, that’s a loss of $10 per item, a gross margin of minus 20.0%. The write-down is $10 times 1,000, or $10,000, and it lands in the period you notice, not the period you sell.
Compare the healthy case. The same unit sold at $100 gives $40 of profit and a 40.0% margin. Selling costs can shrink the recoverable amount further, so use your real selling price net of those costs, not the list price.
One practical tip. Run the test product line by product line and keep your working notes. A shelf of winter coats that lost value is a different story from a shelf of boots that didn’t, and your accountant will ask how you got each number.
| Situation | What to check | Where it’s written |
|---|---|---|
| Stock cost above expected sale price | Write down to net realizable value | ASPE Section 3031 |
| Suppliers failing, cash tight | Going concern over at least twelve months | ASPE paragraph 1400.08 |
| Loan terms at risk | Liquidity and debt repayment plans | FRAS Canada guidance |
| Event after year end | Whether it changes your statements | Your accountant |
Can you keep going for another twelve months?
ASPE paragraph 1400.08 asks management to look at all available information about the future, which is at least, but not limited to, twelve months from the balance sheet date. The factors include profitability, debt repayment schedules and where replacement financing could come from.
So when a key supplier folds, don’t stop at the stock count. Redo your cash forecast with the higher costs and the slower deliveries. If the forecast fails, the statements need extra disclosure, and possibly a different basis. That’s the moment to call the accountant who signs them, not after.
The line of credit calculator helps with the plain part: what your interest costs if you lean on credit to carry stock for three extra months.
What should you tell readers of the statements?
Say what happened, what it cost and what you did about it, in ordinary words. A lender or buyer reading your statements wants to know the size of the hit and whether it’s over. We didn’t confirm a specific disclosure wording, so follow your own framework (ASPE or IFRS) with your accountant.
Tax is a separate exercise. Your write-down changes accounting profit, but the corporate tax calculator works from tax rules, and we couldn’t confirm that the two match for inventory, so don’t assume they do.
What should you do this month?
You don’t need a perfect model, just a short routine you can repeat.
- List every inventory line affected by late, rerouted or repriced shipments.
- Compare each line’s cost with what you now expect to sell it for, after selling costs.
- Rebuild the cash forecast for the next twelve months with the new costs and delivery times.
- Write a short note on what changed and when you noticed it, while the details are fresh.
- Send all of it to your accountant before the year end work starts, not during.
Mistakes and limits
People most often forget to test inventory again. The rule says each period, and one review at year end misses the price drop that hit in spring. Another slip is treating a price drop as temporary without evidence.
A third is reading only the ASPE rule when you report under IFRS. We confirmed the ASPE text and did not pull the IFRS wording, so if you’re a listed company, read IFRS. We also give no data on firm fees, insurance or any product, because we couldn’t verify them.
The sources behind this page
Rules come from FRAS Canada (ASPE Section 3031 guidance and the going concern resource). The survey figures come from Statistics Canada, Canadian Survey on Business Conditions, third quarter 2025, run from 2 July to 6 August 2025. Examples use our own calculators. No level of government runs or endorses this site.
Frequently asked questions
How do I value inventory after a supply disruption?
Private enterprises use the lower of cost and net realizable value under ASPE Section 3031. If you can't recover the cost, write it down.
How often should inventory be tested for write-downs?
The FRAS Canada guidance says to test impairment of inventory in each subsequent period, which means every reporting period and not just the year end.
What is the going concern period?
ASPE paragraph 1400.08 says management looks at information about the future that is at least, but not limited to, twelve months from the balance sheet date.
How many Canadian businesses felt tariff effects?
In Statistics Canada's third quarter 2025 survey, 37.3% said US tariffs had a negative impact and 15.4% had changed suppliers in the previous three months.
Does a book write-down lower my tax bill?
Not automatically. Accounting and tax rules differ, and we couldn't confirm how inventory write-downs are treated for tax, so ask the accountant who files.
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