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IASB Issues Pillar Two Exposure Draft For Deferred Tax

 
Today, the International Accounting Standards Board (IASB) issued an Exposure Draft for proposed amendments to IAS 12 to take account of the Pillar Two Model Rules.
 
The proposals are open for consultation until March 10, 2023, and the IASB expects to finalise any amendments in the second quarter of 2023.
 
The international implementation of the Pillar Two GloBE Rules gives rise to a number of tricky tax accounting issues, including how to account for top-up tax,  what information should be disclosed when accounting for deferred taxes related to top-up tax, and how useful that information would be.
 
The Pillar Two GloBE Rules may flow from the financial accounts but they will also have an impact on the financial accounts. 
 
Top-up tax (or any tax paid under a qualified domestic minimum top-up tax) will clearly impact on current tax, but would need to be considered for deferred tax purposes as well (see our article Pillar Two Accounting Disclosures Under IFRS).
 
The problem is exacerbated as many jurisdictions are to implement Pillar Two legislation in 2023 and there is therefore a relatively short time-scale in which to determine a unified approach.  If no action were taken this could result in entities applying their own interpretations with different accounting treatments being applied between MNEs and information that may not be useful for users of financial statements.
 
Given there is insufficient time for the IASB to undertake a detailed consideration of the impact of the GloBE rules on IAS 12, the IASB Exposure Draft proposes:

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