In December 2021, the Organisation for Economic Co-operation and Development (OECD) published its Pillar Two model rules. The rules are part of a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The Pillar Two model rules:

• aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate; and
• would achieve that aim by applying a system of top-up taxes that results in the total amount of tax payable on profit in each jurisdiction representing at least the minimum rate of 15%.

The amendments to FRS 102 introduce a temporary exception to the accounting for deferred taxes arising from the implementation of the OECD’s Pillar Two model rules, alongside targeted disclosure requirements.  They follow similar amendments to IAS 12 Income Taxes issued by the International Accounting Standards Board in May 2023.

FRS 101 has been amended to introduce an exemption for qualifying entities from certain disclosures introduced by the amendments to IAS 12 that are primarily relevant to the consolidated financial statements of a group, provided that equivalent disclosures are included in the consolidated financial statements in which the qualifying entity is included.  A similar amendment has been made to FRS 102 for qualifying entities.

The temporary exception introduced into FRS 102 applies immediately and retrospectively upon issue of the amendments. The effective date for the disclosure requirements is accounting periods beginning on or after 1 January 2023, with early application permitted.

A press release, including links to the Amendments are available on the FRC website.