The Institute has
responded to the International Accounting Standards Board's (IASB's) exposure draft relating to the potential effects of the OECD’s Pillar Two model rules on the accounting for income taxes by an entity applying IAS 12.
In January 2023, the IASB released the exposure draft (ED) International Tax Reform—Pillar Two Model Rules Proposed amendments to IAS 12. This proposes a temporary exception to the accounting for deferred tax arising from the implementation of the OECD Pillar Two model rules. Also proposed are targeted disclosure requirements for companies affected by the rules.
These proposed amendments to IAS 12 Income Taxes are intended to provide relief for entities subject to the Pillar Two model rules and to avoid inconsistent interpretations of IAS 12 developing in practice.
The OECD Pillar Two rules generally apply to multinational groups with revenue in their consolidated financial statements exceeding €750 million in at least two of the four preceding fiscal years.
In its response, the Institute noted its agreement with the proposals in the ED and its support for the introduction of the temporary exception to the requirements in IAS 12. However, the Institute also noted that as the temporary exception represents a departure from the principles of IAS 12, the IASB should ensure their workplan involves close monitoring of the implementation of the Pillar Two model rules around the world and that the temporary exception should be replaced with an appropriate solution in a realistic timeframe.