The International Accounting Standards Board (IASB) voted at a meeting yesterday (11 April) to introduce a package of temporary relief for the accounting of deferred taxes in IAS 12 - Income Taxes, following the OECD's Pillar Two tax reform.
Pillar Two model rules, which came into effect this year, aim to address the tax challenges arising from the digitalisation of the economy and provide a template for the implementation of a minimum corporate tax rate of 15% that large multinational companies (over €750m in consolidated revenue) would pay on income generated in each jurisdiction in which they operate.
All 13 IASB members present at the meeting voted in favour of the staff's recommendation to introduce a temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the global tax rules.
This reporting exception will be mandatory and companies will not be required to disclose that they have used the exception.
The Board also voted unanimously to require companies to disclose either qualitative or quantitative information on their exposure to Pillar Two income taxes. If that information is not known or estimable, companies will be required to disclose that fact.
Companies will be required to apply these reporting requirements for annual reporting periods beginning on or after 1 January 2023 but will not be required to apply them in interim financial reports in 2023.
IASB chair Andreas Barckow said he was "confident that the final amendments will respond to our stakeholders' urgent needs that have arisen from the implementation of the OECD's Pillar Two model rules".
Finally, the board all voted in favour of the staff recommendation not to re-expose the amendments to IAS 12 and will begin the balloting process.
This finalises the board's decisions on the changes to IAS 12, with the staff cleared to proceed with drafting the amended standard which is due to be issued at the end of May.
