Cannabis & Regulated Substances Knowledge Center
Explore our verified library of Cannabis & Regulated Substances transactions. Every entry is reviewed for IFRS compliance and real-world accuracy by our technical accounting team.
IRC §280E — Complete Disallowance of Ordinary Business Expenses (Cannabis-Specific Tax Law)
Computing the tax impact of IRC §280E — the provision that prohibits cannabis businesses from deducting any ordinary business expenses because cannabis remains a Schedule I controlled substance, creating effective tax rates of 60–80%.
§471 Inventory Cost Capitalization — Maximizing COGS for Cultivators Under §280E
Capitalizing the maximum allowable costs into cannabis inventory under IRC §471 — the critical tax planning strategy that reduces §280E's impact by increasing COGS (the only allowable deduction).
Biological Assets — Growing Cannabis Plants at Fair Value (IAS 41 for Canadian Companies)
Recognizing cannabis plants as biological assets at fair value less costs to sell — the IFRS 41 requirement for Canadian public cannabis companies that creates unrealized gains on growing inventory.
Dispensary Retail Revenue — Point-of-Sale Recognition with Excise Tax and Local Cannabis Tax
Recording retail cannabis sales at the dispensary — with revenue recognized at point of sale, excise taxes collected from customers, and the significant state/local cannabis tax burden.
Wholesale Cannabis Sale — Bulk Flower, Trim, or Distillate to Licensed Processors/Retailers
Recording wholesale cannabis transactions between licensed cultivators and licensed processors or retailers — with revenue recognized at delivery and transfer of control, subject to strict interstate commerce restrictions.
Multi-State Operator (MSO) — Management Services Agreement (Non-Plant-Touching Entity)
Recording management services fee income earned by a non-licensed MSO entity that provides business services to licensed cannabis operators — structured to separate the regulated plant-touching business from the §280E-free management services.
State Cannabis License — Intangible Asset (Finite-Lived, Amortized Over License Term)
Recognizing a cannabis operating license (dispensary, cultivator, or processor) as an intangible asset — acquired through application, purchase, or business combination — amortized over the license term.
Cannabis Cash Management — Unbanked Operations and Alternative Financial Services
Recording the unique cash management challenges of cannabis businesses — operating largely without traditional banking due to federal prohibition, requiring specialized cash handling, armored transport, and alternative payment solutions.
Cannabis Inventory Stages — From Seed/Clone Through Harvest and Finished Products
Tracking cannabis inventory through the unique production stages — propagation, vegetative growth, flowering, harvest, drying/curing, trimming, and packaging — with costs accumulating at each stage.
§280E Expense Allocation — Separating Deductible COGS from Non-Deductible SG&A
Systematically allocating cannabis business costs between COGS (deductible under §471) and SG&A (non-deductible under §280E) — the most critical and contentious cost accounting exercise in cannabis taxation.
State Cannabis Excise Tax — Wholesale vs. Retail Excise Structures
Accruing state cannabis excise taxes — distinguishing between wholesale-level excise taxes (applied when the cultivator sells to a retailer) and retail-level excise taxes (applied at the point of consumer sale).
Cannabis Inventory Write-Down — NRV Impairment in Oversupplied Markets
Writing down cannabis inventory to net realizable value when the market price per gram falls below the cost per gram — an increasingly common situation in mature, oversupplied cannabis markets.
Cannabis M&A — Business Combination PPA (License Intangible as Primary Asset)
Allocating the purchase price of an acquired cannabis company — with the state cannabis licenses as the primary identifiable intangible, and goodwill representing the assembled workforce, customer relationships, and brand.
Ancillary Cannabis Services — Non-Plant-Touching Revenue Not Subject to §280E
Recording revenue from ancillary cannabis services — software, consulting, real estate, and equipment leasing to cannabis businesses — which is NOT subject to §280E because the provider doesn't traffic in cannabis.
Canadian Cannabis Company — IFRS Reporting vs. US GAAP Differences
Identifying the key IFRS vs. US GAAP differences for Canadian cannabis companies (TSX-listed) — including biological assets under IAS 41, no §280E, and different revenue recognition principles.
Facility Lease Allocation — Splitting Rent Between §280E-Deductible (Cultivation) and Non-Deductible (Retail)
Allocating facility rent between COGS (cultivation space — deductible) and SG&A (retail/office space — non-deductible under §280E) for a vertically integrated cannabis company.
Medical Cannabis — Patient Registry and Dispensary Sales to Registered Patients
Recording medical cannabis sales to registered patients — with state-mandated patient verification, medical exemptions from retail excise tax in some states, and HIPAA-adjacent privacy protections for patient records.
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