Operators can deduct the development allowance in respect of expenses incurred before May 13, 1994, in calculating their annual profit for a fiscal year.

The maximum amount that an operator can deduct as a development allowance is equal to the balance of cumulative exploration and development expenses at the end of the year.

Balance of cumulative exploration and development expenses

The balance of cumulative exploration and development expenses at the end of the fiscal year is equal to the expenses incurred before May 13, 1994, for inside and outside exploration and development work, minus any amounts that the operator deducted as a development allowance in calculating the annual profit for previous fiscal years.