Amendments to IAS 12 were issued in May 2023 to respond to concerns about the potential implications of the imminent implementation of the OECD Pillar Two Model Rules on the accounting for income taxes. These Model Rules lay out a coordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

In the Czech Republic, a draft  Act on top-up taxes for large-scale multinational and large-scale domestic groups is currently in the legislative process. The Act should be effective from 31 December 2023.

The amendments to IAS 12 introduce a temporary exception from accounting for deferred taxes arising from the implementation of the OECD Pillar Two Model Rules, together with targeted disclosure requirements for affected entities.

Applying the exception, an entity does not recognise deferred tax assets and liabilities related to the OECD Pillar Two income taxes. It also does not disclose any information about these deferred tax assets and liabilities.

In periods in which Pillar Two legislation is enacted or substantively enacted, but not yet in effect, an entity is required to disclose known or reasonably estimable information that helps users of financial statements understand the entity’s exposure to Pillar Two income taxes arising from that legislation.

The amendments require that an entity apply the exception—and the requirement to disclose that it has applied the exception—immediately upon issuance of the amendments and retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The remaining disclosure requirements are required for annual reporting periods beginning on or after 1 January 2023.

We brought more information about these amendments to IAS 12 in our article IASB published amendments to IAS 12.

Source: www.iasplus.com, iGAAP in Focus from May 2023