The International Accounting Standards Board issued a set of amendments Tuesday to its income tax standards to give companies temporary relief from accounting for deferred taxes arising from the Organization for Economic Cooperation and Development’s international tax reform plans.
The amendments to IAS 12, “Income Taxes” will provide a temporary exception to the accounting standards for deferred taxes from jurisdictions implementing the OECD’s global tax rules. They also include targeted disclosure requirements to help investors better understand a company’s exposure to income taxes arising from the OECD tax reform, especially before legislation implementing the rules take effect.
The OECD published its Pillar Two model rules in December 2021 to subject large multinational companies to a minimum tax rate of 15%. More than 135 countries and jurisdictions representing more than 90% of global GDP have agreed to the Pillar Two model rules. While the Biden administration and the Treasury Department supports the OECD rules, they have been challenged in Congress, especially by Republican lawmakers who contend such changes would disadvantage U.S. companies and would need to be ratified by Congress before they could be implemented.
The goal of the amendments to the income tax standard for the IASB is to ensure consistency in financial statements while easing into implementation of the rules internationally.
“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,” said IASB chair Andreas Barckow in a statement Tuesday. “We are monitoring developments as jurisdictions implement the Pillar Two model rules. A future maintenance project has been added to the pipeline in which we will revisit the temporary exception and related disclosures.”
Companies that use International Financial Reporting Standards can benefit from the temporary exception immediately, but are required to provide the disclosures to investors for annual reporting periods beginning on or after Jan. 1 2023.
More details can be found here. The IASB has a separate project considering possible amendments to the IFRS for SMEs accounting standards related to the OECD tax reform.
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