International Tax Reform: Pillar Two Model Rules – Amendments to IAS 12

The Amendments to IAS 12 International Tax Reform: Pillar Two Model Rules were approved for adoption by all members of the UK Endorsement Board on 19 July 2023.

A link to the Adoption Statement of the Amendments and the text of the Amendments can be found here.

The Amendments are not likely to lead to a significant change in accounting practice and do not meet the criteria for a post-implementation review under Regulation 11 in SI 2019/685.

Development of the IASB’s proposals 

The IASB’s proposals were set out in Exposure Draft ED/2023/1 International Tax Reform: Pillar Two Model Rules - Amendments to IAS 12 (the ED). The UKEB submitted its final comment letter on 9 March 2023.

UKEB Endorsement Criteria Assessment

On 26 June 2023 the UKEB published its draft Endorsement Criteria Assessment (ECA) of the Amendments.

The public consultation period closed on 10 July 2023. Thank you to all stakeholders that provided feedback.

All responses received were considered when finalising the ECA. The UKEB Final ECA was published on 19 July 2023. An accompanying Feedback Statement, describing how feedback received from stakeholders was addressed, was also published on the same date.

The following relevant documents are available at the foot of this page:

• Draft ECA and Invitation to Comment
• Responses from stakeholders
• Final ECA
• Feedback Statement

UKEB meetings

The Amendments were discussed in the following Board meetings:

• 19 January 2023: IASB general update
• 23 February 2023: Project Initiation Plan and Draft Comment Letter
• 7 March 2023: Final Comment Letter
• 27 April 2023: IASB General Update
• 22 June 2023: Draft Endorsement Criteria Assessment
• 13 July 2023: Endorsement Criteria Assessment and Adoption Package

Description of the Amendments

Scope

The Amendments define the scope of the exception as applying to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules.

Periods when the tax is in effect

Once the tax is in effect, an entity must disclose its current tax in relation to Pillar Two top-up taxes separately.

Periods when the tax is enacted or substantively enacted, but not yet in effect

For periods in which Pillar Two legislation is enacted or substantively enacted but not yet in effect, entities would be required to disclose “information that helps users of financial statements understand the entity’s exposure to Pillar Two income taxes”.

In meeting that disclosure objective, an entity should disclose known or reasonably estimable quantitative and qualitative information about its exposure at the end of the reporting period. That information, however, need not reflect all the specific requirements of the legislation and could be presented as an indicative range.

Entities which do not have such information about their exposure to Pillar Two taxes must disclose that fact, together with information on progress made in assessing the entity’s exposure.

Transition

Entities are required to apply the mandatory temporary exception immediately and retrospectively and disclose that it has been applied. The targeted disclosure requirements for periods in which Pillar Two legislation is enacted or substantively enacted but not yet in effect are effective for annual periods beginning 1 January 2023. They are not required for interim periods ending in 2023.