The international Accounting Standards Board (IASB) has issued amendments to IAS 12 Income Taxes. The amendments give companies temporary relief from accounting for deferred taxes arising from the Organisation for Economic Co-operation and Development’s (OECD) international tax reform.
The OECD published the Pillar Two model rules in December 2021 to ensure that large multinational companies would be subject to a minimum 15% tax rate. More than 135 countries and jurisdictions representing more than 90% of global GDP have agreed to the Pillar Two model rules.
The IASB has taken urgent action to respond to stakeholders’ concerns about the uncertainty over the accounting for deferred taxes arising from the implementation of the rules.
The amendments will introduce:
- A temporary exception─ to the accounting for deferred taxes arising from jurisdictions implementing the global tax rules. This will help to ensure consistency in the financial statements while easing into the implementation of the rules.
- Targeted disclosure requirements─ to help investors better understand a company’s exposure to income taxes arising from the reform, particularly before legislation implementing the rules are in effect.
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 1 January 2023
IASB chair Andreas Barckow explained: “These amendments respond to stakeholder feedback and will ensure that companies are supported during the implementation of the OECD’s rules, while enhancing the financial information provided to investors about how these companies are affected by the international tax reform.”