International Tax Reform—Pillar Two Model Rules: Potential amendments to IAS 12, Income Taxes [Completed]

Effective date:

Com­pa­nies can ben­e­fit from the tem­po­rary ex­cep­tion im­me­di­ately but are re­quired to pro­vide the dis­clo­sures to in­vestors for an­nual re­port­ing pe­ri­ods be­gin­ning on or af­ter Jan­u­ary 1

Last updated:

June 2023

Overview

At its meeting in November 22-24, 2022, the IASB tentatively decided to propose amendments to IAS 12, Income Taxes. The proposed amendments would introduce a temporary exception from accounting for deferred taxes arising from the implementation of the OECD’s Pillar Two model rules, as well as targeted disclosures for affected entities.

On Jan­u­ary 9, 2023, the IASB pub­lished an Ex­po­sure Draft, In­ter­na­tional Tax Re­form — Pil­lar Two Model Rules (Pro­posed amend­ments to IAS 12) to re­spond to stake­hold­ers’ con­cerns about the po­ten­tial im­pli­ca­tions of the im­mi­nent im­ple­men­ta­tion of the OECD pil­lar two model rules on the ac­count­ing for in­come taxes. Com­ments are re­quested by March 10, 2023.

On January 24, 2023, the AcSB issued an Exposure Draft which corresponds to the one issued by the IASB, Comments are also requested by the AcSB for March 10, 2023.

On April 11, 2023, the IASB announced that it has finalized its amendments to IAS 12, Income Taxes, as a result of the Pillar Two model rules published by the OECD.

The amendments will provide temporary relief for companies from having to account for deferred taxes arising from the implementation of the Pillar Two model rules.

The amendments will introduce:

  • a temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the global tax rules; and
  • targeted disclosure requirements for affected companies to help users of the financial statements better understand a company’s exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date.

The amendments will ensure that affected companies apply IAS 12 consistently and that investors are given better information before and after any jurisdictional Pillar Two legislation comes into effect.

The IASB consulted on the proposed amendments in the first quarter of 2023 following stakeholders' concerns about the potential implications of these rules for the accounting for income tax that is presented in financial statements. While almost all stakeholders agreed with the suggested temporary exception from having to calculate deferred taxes, they had differing views on the level of information expected from companies during the implementation phase.

On May 23, 2023, the IASB issued the amendments to IAS 12, Income Taxes. Companies can benefit from the temporary exception immediately but are required to provide the disclosures to investors for annual reporting periods beginning on or after January 1, 2023. The AcSB expects to update the CPA Canada Handbook – Accounting Part I for these changes in the summer of 2023.

On June 9, 2023, the AcSB issued the amendments to IAS 12, Income Taxes, to Part I of the CPA Canada Handbook - Accounting.

Other developments

June 2023

On June 9, 2023, the AcSB issued the amendments to IAS 12, Income Taxes, to Part I of the CPA Canada Handbook - Accounting.

May 2023

On May 23, 2023, the IASB issued the amendments to IAS 12, Income Taxes.

January 2023

On January 30, 2023, the IASB staff updated the work plan to indicate that the Board plans to review the Exposure Draft feedback in April 2023.

On January 24, 2023, the AcSB issued an Exposure Draft which corresponds to the one issued by the IASB, Comments are also requested by the AcSB for March 10, 2023.

On January 9, 2023, the IASB published an exposure draft International Tax Reform — Pillar Two Model Rules (Proposed amendments to IAS 12) to respond to stakeholders’ concerns about the potential implications of the imminent implementation of the OECD pillar two model rules on the accounting for income taxes. Comments are requested by March 10, 2023.

November 2022

At its meeting on November 22-24, 2022, the IASB decided to add a new project to its Work Plan in respect of this item.

 

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