3 International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12)

7 March 2023 Agenda Paper 3

Executive Summary

Project Type: Influencing Project Scope: Narrow-scope amendment

Purpose of the paper

The purpose of this paper is to obtain Board feedback and approval for the following:

1. Issue of a Final Comment Letter (FCL) on the IASB Exposure Draft (ED) International Tax Reform – Pillar Two Model Rules: Amendments to IAS 12;
2. The (draft) Due Process Compliance Statement (DPCS).

In addition, the Board is asked for any comments on the draft Feedback Statement.

Summary of the Issue

1The IASB published the ED on 9 January 2023 with a comment period of 60 days.

2As agreed by the Board at its February meeting, on 24 February 2023 the Secretariat issued the Draft Comment Letter (DCL) on the IASB ED International Tax Reform – Pillar Two Model Rules: Amendments to IAS 12 for a short comment period of 7 days. The UKEB's comment deadline was 3 March 2023.

3The UKEB DCL welcomed the ED. It supported its objectives, the accelerated timetable set by the IASB and the introduction of a mandatory temporary exception from accounting for deferred tax arising from the Pillar Two model rules. In addition, it set out some potential enhancements to the proposals, identified from our analysis and outreach with stakeholders.

4Stakeholder responses to the DCL, now published on the project webpage, broadly but not entirely agreed with the UKEB draft position. This paper summarises the feedback received and the resulting possible changes to the UKEB comment letter. We have included detailed questions for the Board regarding the feedback on (i) scope; (ii) disclosure before Pillar Two legislation is effective; and (iii) disclosure once Pillar Two legislation is effective.

5Once the FCL is approved for publication, the FCL will be submitted to the IASB in time for its 10 March 2023 comment deadline and published on the UKEB website. The final Feedback Statement will be brought to the Board's 23 March 2023 meeting for approval, together with the final DPCS for noting.

Decisions for the Board

Decision

Subject to any amendments arising at this meeting, does the Board approve:

• the Final Comment Letter for issue to the IASB and publication on the UKEB website?
• The (draft) DPCS for the influencing stage?

Does the Board have any comments on the draft Feedback Statement?

Recommendation

The Secretariat recommends that, subject to any amendments agreed at this meeting, the Board approves the FCL for issue and publication, and the draft DPCS.

Appendices

• Appendix A Final Comment Letter
• Appendix B Feedback Statement
• Appendix C (Draft) Due Process Compliance Statement

Purpose

1This paper provides the Board with the following:

1. The Final Comment Letter (DCL) on the IASB Exposure Draft (ED) International Tax Reform – Pillar Two Model Rules: Amendments to IAS 12 (the Amendments).
2. The draft Feedback Statement.
3. The draft Due Process Compliance Statement (DPCS) on the influencing process for this project.

Background

2The Pillar Two model rules introduce a minimum tax rate for entities and groups with turnover of €750m or above. In jurisdictions where an entity or group's effective tax rate is below 15%, the model rules require the entity or group to top up the tax it pays to that rate.

3Stakeholders have expressed concern around the complexities of accounting for income taxes in respect of the Pillar Two model rules, and especially around accounting for deferred taxes.

4In response to this stakeholder feedback, the IASB published the Exposure Draft (ED) International Tax Reform–Pillar Two Model Rules on 9 January 2023.

5Stakeholders highlighted to the IASB that there is an urgent need for clarity due to the expected enactment of the Pillar Two model rules in 2023 across multiple jurisdictions, including the UK. The IASB therefore plans to introduce the amendments to IAS 12 on an accelerated timetable. The ED is open for comment for 60 days until 10 March 2023, and the IASB aims to finalise any amendments in Q2 2023.

6Information on the background to the ED was included in the meeting papers for the January 2023 Board meeting (see Paper 5, the IASB general update), and the December 2022 Board meeting (see Paper 6, the IASB general update). An education session on the tax reform was provided to the Board as part of its private meeting in January 2023. An education session on the ED's proposals was provided to the Board at its February 2023 private Board meeting.

7We conducted outreach activities to inform our DCL. In early February, we organised two roundtables, one for accounting firms and institutes by invitation only, and a publicly advertised roundtable aimed at preparers and investors. Both had over 20 attendees. We also discussed the ED at the Investors Advisory Group in February 2023.

8The Board further discussed the DCL at its February meeting, making a number of suggestions, and approved it for issue in draft form.

9The DCL set out that the UKEB welcomes the ED. The UKEB supports its objectives, the accelerated timetable set by the IASB and the introduction of a mandatory temporary exception from accounting for deferred tax arising from the Pillar Two model rules. The DCL also made recommendations for enhancement of the proposed disclosures. Following feedback from stakeholders, these include considering replacing the current detailed requirements with a more general disclosure requirement, or at least, the inclusion of a disclosure objective. However, we also recommend the IASB does not delay publication of the Amendments solely to perfect the disclosures.

10Following the Board's approval of the DCL for public consultation, the DCL was published on the UKEB website.

11Alongside public news alerts and LinkedIn posts, targeted emails were sent to the Accounting Firms and Institutes Advisory Group, the Preparers Advisory Group and the Investors Advisory Group as well as to those who signed up to the roundtables, alerting them to the publication of the DCL.

Feedback received on the DCL

12Feedback was received from three stakeholders (one preparer and two accounting firms). These stakeholders agreed with the UKEB draft position on:

• the proposed mandatory temporary exception and the requirement to disclose that it has been applied;
• the requirement to disclose current tax expense (income) related to Pillar Two separately once Pillar Two legislation is effective (paragraph 88B); and
• the effective date of the Amendments.

Scope

13One stakeholder was unsure if they agreed with the UKEB's suggestion to delete the word 'income' in paragraph 4A of the Amendments. Their concern was that, if taxes that are not income taxes are introduced into IAS 12, then there is a risk of widening the scope of IAS 12 (introducing 'scope creep').

14If the Board shared this concern, an alternative would be to recommend more generally that the IASB clarifies the scope question.

Question for the Board

1Does the Board wish to keep paragraph A7 as drafted, or replace it with a broader recommendation for the IASB to clarify whether and which Pillar Two taxes are included within the scope of IAS 12?

Disclosure before Pillar Two legislation is effective

15All three stakeholders shared the UKEB's concerns that:

1. The information required by 88C (a) was unclear.
2. The information required by 88C (b) could be a poor proxy for information calculated on a Pillar Two basis.
3. The information required by 88C (c) does not provide a sufficient corrective to the information required under 88C (b).

16Two stakeholders agreed with the UKEB's draft position that the IASB should adopt a different approach to disclosures and welcomed the UKEB's suggested general disclosure requirement.

17One of these stakeholders considered that including a disclosure objective alone would not fully address the risk that paragraph 88C as drafted would result in unhelpful, and potentially misleading, information. This stakeholder considered that a disclosure objective needed to be supported with "conditions, factors to consider or specific disclosure requirements" to guide reporting entities.

18The third stakeholder, however, thought that while the framework proposed by the IASB in paragraph 88C did appear to have limitations, it should aid comparability, at least within a jurisdiction. That stakeholder considered that the UKEB's proposal would not necessarily achieve that.

Question for the Board

2Does the Board wish to retain its recommendation that the IASB replace the detailed requirements in 88C with a general disclosure requirement based on the disclosure objective?

19One of the stakeholders that agreed with replacing the detailed requirements with a general disclosure requirement further considered that the UKEB, having recommended a general disclosure requirement, should not comment on the specific disclosure requirements within paragraph 88C because retaining any part of that paragraph would not provide useful information on the expected impact of Pillar Two (FCL paragraphs 19 to 21 and A22 to A24).

20If the Board decides that it does still wish to comment on the specific disclosures proposed at paragraph 88C, the Board could include an additional recommendation (paragraph A23) to address stakeholder concerns. This new draft paragraph would be intended to act as a stronger corrective to any inadequacy of the IAS 12 weighted average effective tax rate as a proxy for the Pillar Two effective tax rate. New paragraph A24 could also be included to emphasise the Board's preference for the general disclosure requirement.

21One stakeholder further observed that it was unclear whether the assessments mentioned at paragraph 88C(c) are required. We have added in a sentence at A16 to reflect this feedback.

22Finally, one stakeholder noted that, if the IASB does publish examples, it would be most useful if they were published at the same time as the Amendments. Should the Board wish to reflect this comment in the FCL, the Secretariat suggests that this could be achieved by incorporating additional text at paragraphs 22 and A25 and amending paragraphs 14 and A17.

Questions for the Board

3Does the Board wish to retain its comments on the specific proposals in draft paragraph 88C?

4If so, does the Board wish to include the additional recommendation at paragraphs 20/21 and A23/A24?

5Does the Board agree to including the point that, if the IASB includes illustrative examples or guidance, it would be most useful if this was done at the same time as the Amendments are issued?

Disclosure once Pillar Two legislation is effective

23One stakeholder commented that it is unclear why the UKEB draft position recommended the general disclosure requirement be retained even after Pillar Two legislation is effective, once the requirement to disclose current tax expense separately applies (FCL paragraphs 18 and A21).

Question for the Board

6Does the Board wish to retain the recommendation that the general disclosure requirement should apply after Pillar Two legislation is effective, retaining FCL paragraphs 18 and A21?

Final Comment Letter (FCL)

24The FCL is attached for consideration and, subject to amendments agreed by the Board, approval for issue to the IASB and publication on the UKEB website.

Feedback Statement

25The draft Feedback Statement relating to the DCL is attached for consideration and approval. The draft Feedback Statement notes where the UKEB final position is subject to the Board's decision.

Due Process Compliance Statement (DPCS)

26The draft DPCS on the influencing stage of this project is attached for consideration. A final version will be brought back to the 23 March 2023 meeting for noting once the process is complete.

Questions for the Board

7Subject to any amendments agreed at this meeting, does the Board approve

• the Final Comment Letter for issue to the IASB and publication on the UKEB website?
• the draft DPCS for the influencing stage?

8Does the Board have any comments on the draft Feedback Statement?

Next steps

27The IASB is expected to issue the final Amendments by early June. The Secretariat will prepare a Draft Endorsement Criteria Assessment (DECA) on those Amendments. The DECA will be brought to the June UKEB meeting for approval to be issued for public consultation.

28Subject to UKEB Advisory Groups confirming the need for the Amendments remains urgent, the DECA will be published for a 14-day comment period with a view to an endorsement decision in July, as agreed by the Board at its February 2023 meeting.

29If the IASB does not issue the Amendments by early June (contrary to the current expectation), the project plan would be reassessed and revised proposals on the ECA project timeline brought back to the Board.

Appendix A: Questions on ED International Tax Reform: Pillar Two Model Rules

Question 1—Temporary exception to the accounting for deferred taxes (paragraphs 4A and 88A)

IAS 12 applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum top-up taxes described in those rules.

The IASB proposes that, as an exception to the requirements in IAS 12, an entity neither recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.

The IASB also proposes that an entity disclose that it has applied the exception.

Paragraphs BC13–BC17 of the Basis for Conclusions explain the IASB's rationale for this proposal.

Do you agree with this proposal? Why or why not? If you disagree with the proposal, please explain what you would suggest instead and why.

A1For the reasons set out in the Basis for Conclusions, we support the proposed approach of requiring entities to neither recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes.

A2We consider that this requirement will enhance the comparability of financial statements whilst providing entities with relief from the cost and complexities of deferred tax accounting in relation to Pillar Two income taxes.

A3We agree with the introduction of a mandatory exception from accounting for deferred tax arising from the Pillar Two model rules and agree that the mandatory exception should be temporary. We also agree with the absence of a 'sunset clause'. This will allow the IASB to consider whether and, if so, how Pillar Two income taxes should be addressed within IAS 12 without undue pressure.

A4However, we consider that the IASB should commit to reviewing these Amendments, once stakeholders have developed experience of the tax requirements and have been able to consider the implications for deferred tax accounting.

A5Furthermore, we support the requirement for entities to state that they have applied the mandatory exception. We consider that this disclosure requirement will provide clarity over the accounting approach taken and increase users' confidence in the comparability of the financial statements.

A6IAS 12 applies to accounting for income taxes.¹ Paragraph BC9 of the ED observes: “Stakeholders generally agree that top-up tax is an income tax – in the scope of IAS 12 Income Taxes – in the consolidated financial statements of the ultimate parent entity of a group subject to the Pillar Two model rules. However, they have said that it is unclear whether top-up tax is an income tax in the financial statements of a group's subsidiaries [...]”. However, while the Amendments may be interpreted as implying that all taxes arising from Pillar Two are income taxes in the scope of IAS 12, the Amendments do not provide an explicit statement to that effect. This may risk increasing diversity in practice in the financial statements of a group's subsidiaries, thereby reducing the comparability of financial statements.

A7In order to provide clarity in this area, the IASB could consider removing the word "income" from the first sentence in paragraph 4A, so that it reads “ This Standard applies to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules [...]'.

A8We also consider that paragraphs 88B and 88C could clarify that the Amendments require a reporting entity to disclose any exposure to top-up tax, even if that exposure arises in respect of a fellow subsidiary not within its control, for example.

Question 2—Disclosure (paragraphs 88B–88C)

The IASB proposes that, in periods in which Pillar Two legislation is enacted or substantively enacted, but not yet in effect, an entity disclose for the current period only:

1. information about such legislation enacted or substantively enacted in jurisdictions in which the entity operates.
2. the jurisdictions in which the entity's average effective tax rate (calculated as specified in paragraph 86 of IAS 12) for the current period is below 15%. The entity would also disclose the accounting profit and tax expense (income) for these jurisdictions in aggregate, as well as the resulting weighted average effective tax rate.
3. whether assessments the entity has made in preparing to comply with Pillar Two legislation indicate that there are jurisdictions:
   1. identified in applying the proposed requirement in (b) but in relation to which the entity might not be exposed to paying Pillar Two income taxes; or
   2. not identified in applying the proposed requirement in (b) but in relation to which the entity might be exposed to paying Pillar Two income taxes.

The IASB also proposes that, in periods in which Pillar Two legislation is in effect, an entity disclose separately its current tax expense (income) related to Pillar Two income taxes.

Paragraphs BC18–BC25 of the Basis for Conclusions explain the IASB's rationale for this proposal.

Do you agree with this proposal? Why or why not? If you disagree with the proposal, please explain what you would suggest instead and why.

Disclosures in periods in which Pillar Two legislation is enacted or substantively enacted, but not yet in effect

A9We support the introduction of requirements for entities to disclose their exposure to Pillar Two income taxes once legislation is enacted or substantively enacted but not yet in effect. We consider that this requirement will go some way to mitigating the absence of deferred tax accounting for Pillar Two income taxes. However, we do not recommend the IASB to delays the publication of the Amendments solely to perfect these disclosures.

A10UK stakeholders agreed that the key objective of the disclosures should be to provide users of accounts with an indication of groups' exposure to paying additional (top-up) taxes. Based on paragraph BC19, this appears to be the overall objective of the disclosures in paragraph 88C. We understand that detailed quantitative information about an entity's exposure to Pillar Two income taxes will not initially be available because of the requirement to produce financial statements significantly ahead of the first Pillar Two return. Therefore, we agree that the IASB has sought to require disclosures that will provide insight without resulting in undue cost or effort.

A11Preparers we spoke to raised no concerns over their practical ability to provide the proposed disclosures under paragraph 88C. However, stakeholders (particularly preparers) expressed concerns that, as drafted, those disclosures may not be sufficient to achieve the objective and, at worst, could be misleading (see paragraphs A14 to A16 below).

Paragraph 88C (a)

A12UK stakeholders questioned the clarity of paragraph 88C (a) – for example, what does 'information about legislation' mean? They considered that the requirement in its current form would likely lead to disclosure of varying quality and potentially to lengthy disclosure of little informational value. Preparers were particularly concerned that the requirement does not appear to allow for the exercise of materiality judgements in the provision of this information (for example, regarding an entity's operations in each relevant jurisdiction).

A13For example, if a parent company's jurisdiction has enacted the Pillar Two Income Inclusion Rule, information about legislation enacted but not yet effective in subsidiary jurisdictions could be of minimal relevance from a group perspective. Nevertheless, such disclosure could appear to be required by 88C (a). We recognise, therefore, that entities and auditors will need to use judgement when meeting this requirement. We suggest incorporating a disclosure objective as explained below.

Paragraphs 88C (b) and (c)

A14UK preparers and accounting firms expressed concerns that paragraph 88C (b) may provide qualitative and quantitative information that does not meet the objective expressed at BC19. They commented that the jurisdictional effective tax rate calculated on an IAS 12 basis could be a poor proxy for the jurisdictional effective tax rate calculated on a Pillar Two basis. ²

A15We understand that the disclosures under paragraph 88C (c) are designed to indicate cases when an entity is aware that the information provided under 88C (b) may be insufficient in isolation. UK accounting firms and preparers commented that the existence of 88C (c) highlights the inadequacy of the IAS 12 paragraph 86 effective tax rate as a proxy. Further, preparers expressed concerns that paragraph 88C (c) does not provide a sufficient corrective, since it does not require any quantitative, or other detailed information.

A16Stakeholders expressed concern over the lack of clarity in the information required under 88C(c). First, if an entity has not completed its Pillar Two assessments, it might provide no information under 88C (c) at all. In addition, 88C (c) does not require any quantitative or other detailed information. Listing jurisdictions under paragraph 88C (c) would not give any indication as to the quantum of tax exposure in the relevant jurisdictions, so even with this additional information the disclosure under 88C (b) could be insufficient.

General disclosure requirement

A16.A17Given the challenges and concerns noted above, we recommend that the IASB considers replacing the detailed requirements in paragraph 88C with a more general requirement to provide information sufficient to meet the objective, namely to help users of the accounts assess the entity's current and future exposure to paying top-up tax, based on assessments the entity has made in preparing to comply with Pillar Two legislation. This requirement could then be accompanied by some illustrative examples of how entities may meet that disclosure objective, possibly as educational guidance, developed after the publication of the Amendments.

A17.A18As different parts of the Pillar Two model rules are enacted and then become effective around the world, groups will have to report on many different economic and legal scenarios. The disclosures required during the period when the tax is substantively enacted but not yet effective are likely to have a maximum lifespan of one or two years. A more flexible requirement, along the lines of our suggestion here, could facilitate the provision of relevant information tailored to an entity's need as their circumstances evolve over time. Additionally, it may be more appropriate useful than specific detailed requirements which may not meet the overall disclosure objective in all scenarios.

A18.A19IAS 8 paragraphs 30 and 31 offer a precedent for entities to disclose known or reasonably estimable information relevant to assessing the possible impact of future events. They are applied in the context of the introduction of a new accounting standard. We consider that this context is similar, in that users need forward-looking information in respect of new regulatory requirements, albeit for taxation rather than accounting.

A19.A20For example, a general disclosure requirement could include wording such as: "An entity shall provide information, based on the assessments it has made to date in preparing to comply with Pillar Two legislation, to enable users to assess an entity's current and future exposure to paying Pillar Two top-up tax, the jurisdictions that are the primary cause of such exposure and, to the extent a reliable estimate can be made, the expected quantitative impact".

A20We suggest that these general disclosure requirements should remain in place for the life of the temporary exception, but should be reconsidered when the IASB reviews the Amendments, once most jurisdictions have implemented the Pillar Two model rules.

A21 A21.A22Should the IASB decide to retain detailed disclosure requirements as set out at 88C (a), (b) and (c), we recommend that the IASB incorporates the objective of the disclosure requirement, i.e. “ to help users assess an entity's exposure to paying top-up tax" (ED/2023/01 paragraph BC19) in the disclosure requirement itself at paragraph 88C. In accordance with the findings of the IASB project Disclosure Initiative—Principles of Disclosure, including the objective of the disclosure would assist preparers and auditors in making judgements about what information users would find most relevant.

A23Furthermore, we consider the information required under 88C (c) should be specified, since as drafted it is not effective as a corrective to 88C (b). We recommend that for jurisdictions identified under 88C(c)(i), an entity should disclose the aggregate amount of the quantitative information provided under paragraph 88C(b) that relates to those jurisdictions, and for jurisdictions identified under paragraph 88C(c)(ii), an entity should disclose the aggregate accounting profits and average effective tax rate on an IAS 12 basis.

A24However, we understand such disclosures could be complex. Further, they may not fully address the risk that paragraph 88C as currently drafted may be unhelpful, and potentially misleading. Our preference, therefore, remains a more general disclosure requirement, such as the one suggested at paragraph 17 / A20.

A22.A25We further recommend that the IASB complements the general disclosure requirement with illustrative examples or educational guidance and examples of the kinds of disclosure it expects from preparers to ensure consistency and quality of disclosure. If the IASB does publish examples or guidance, stakeholders have noted that they would be most useful if published at the same time as the Amendments. However, we would not wish the Board to delay publication of the Amendments to produce such guidance.

Disclosures in periods in which Pillar Two legislation is in effect

A23.A26We support the proposed requirement for entities to disclose their current tax expense in relation to Pillar Two income taxes separately, once Pillar Two is effective. We consider that separate disclosure will provide useful information on the impact of this new international tax, usefully compensating also for the temporary exception from deferred tax accounting for Pillar Two income taxes.

A24.A27However, IAS 12 has not previously required separate disclosure of a specific tax. We therefore recommend that the IASB includes the rationale for requiring this disclosure – which will be ongoing – within the Basis for Conclusions.

A25.A28UK preparers noted that paragraphs 88C (a), (b) and (c) require detail on the jurisdiction-by-jurisdiction impact of the Pillar Two model rules during the period between the Pillar Two model rules being enacted and coming into effect. This information exceeds the information required once Pillar Two legislation is in effect. UK preparers thought that the reason for requiring this additional detail for a short interim period only was unclear. They were concerned that the reduction in detail once Pillar Two was effective could be perceived as a lack of transparency.

Question 3—Effective date and transition (paragraph 98M)

The IASB proposes that an entity apply:

1. the exception—and the requirement to disclose that the entity has applied the exception—immediately upon issue of the amendments and retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors; and
2. the disclosure requirements in paragraphs 88B–88C for annual reporting periods beginning on or after 1 January 2023.

Paragraphs BC27–BC28 of the Basis for Conclusions explain the IASB's rationale for this proposal. Do you agree with this proposal? Why or why not? If you disagree with the proposal, please explain what you would suggest instead and why.

A27We agree with the IASB's proposals regarding the effective date and transition.

Feedback Statement

IASB Exposure Draft: International Tax Reform: Pillar Two Model Rules

[DRAFT FOR BOARD REVIEW]

March 2023

The UK Endorsement Board (UKEB) is responsible for endorsement and adoption of IFRS for use in the UK and therefore is the UK's National Standard Setter for IFRS. The UKEB also leads the UK's engagement with the IFRS Foundation (Foundation) on the development of new standards, amendments and interpretations.

The comment letter to which this feedback statement relates forms part of those influencing activities and is intended to contribute to the Foundation's due process. The views expressed by the UKEB in this letter are separate from, and will not necessarily affect the conclusions in, any endorsement and adoption assessment on new or amended International Accounting Standards undertaken by the UKEB.

Contents

• Purpose of this feedback statement
• The IASB's Exposure Draft
• Outreach approach
• UKEB and stakeholder views

Purpose of this feedback statement

This feedback statement presents the views of UK stakeholders received during the UKEB's outreach activities on the IASB's Exposure Draft International Tax Reform: Pillar Two Model Rules and explains how the UKEB's comment letter addressed those views.

The IASB's Exposure Draft

Stakeholders have said that accounting for deferred tax on Pillar Two top-up tax would be impracticable and could lead to diversity in practice. In response, the IASB has issued an Exposure Draft (ED).

It proposes a mandatory temporary exception from accounting for deferred tax arising from the Pillar Two model rules. When the exception is applied, entities should state this fact.

Once the Pillar Two model rules are effective in a jurisdiction, the entity should present its Pillar Two current tax expense or income separately from other current tax expense or income. [ED paragraph 88B]

During the period in which Pillar Two legislation is enacted or substantively enacted but not yet in effect, an entity should present the following disclosures:

1. Information about such legislation enacted or substantively enacted in jurisdictions where the entity operates. [ED paragraph 88C (a)]
2. The jurisdictions where the entity's effective tax rate under IAS 12 is below 15%, the aggregate accounting profit and tax expense or income for those jurisdictions, and the resulting weighted average effective tax rate. [ED paragraph 88C (b)]
3. Whether assessments the entity has made in preparing for Pillar Two indicate that there are jurisdictions not included under ED paragraph 88C(b) where the entity considers it may be exposed to paying Pillar Two top-up tax, or included at ED paragraph 88C(b) where the entity considers it will not be exposed to paying Pillar Two top-up tax. [ED paragraph 88C (c)]

Outreach approach

The UKEB's outreach activities took place in January and February 2023.

As the ED related to an urgent narrow scope amendment, the UKEB applied a proportionate approach, enabling the IASB comment deadline to be met. We conducted outreach to develop our Draft Comment Letter (DCL).

We gathered feedback principally through an Investors' Advisory Group meeting and two roundtables, one for accounting firms and institutes and one for preparers and investors. We also held separate discussions with two accounting firms and the FRC.

All comments and views were considered in reaching the UKEB's views expressed in its final comment letter.

Seven separate discussions were held with stakeholders, including accounting firms and institutes who represented the views of wider groups.

Once the DCL was published, we shared it publicly as well as with our outreach participants.

Four responses to the DCL were received.

I. Scope, mandatory temporary exception and requirement to disclose application of the exception

2. Disclosure requirements

5. Effective date

Disclaimer

This feedback statement has been produced in order to set out the UKEB's response to stakeholder comments received on the IASB's Exposure Draft International Tax Reform – Pillar Two Model Rules: Amendments to IAS 12 and should not be relied upon for any other purpose.

The views expressed in this feedback statement are those of the UK Endorsement Board at the point of publication. Any sentiment or opinion expressed within this feedback statement will not necessarily bind the conclusions, decisions, endorsement or adoption of any new or amended IFRS by the UKEB.

Contact Us

UK Endorsement Board

1st Floor | 1 Victoria Street | London | SW1H 0ET | United Kingdom

[email protected]

Web: www.endorsement-board.uk

Due Process Compliance Statement: Exposure Draft: International Tax Reform – Pillar Two Model Rules: Amendments to IAS 12

General UKEB requirements: The UKEB adopts international accounting standards for use within the UK, in accordance with SI 2019/685 and applies its own processes before it decides to endorse and adopt a new or amended international accounting standard.

Exposure Draft: International Tax Reform – Pillar Two model rules: Amendments to IAS 12 was published on 9 January 2023. The IASB comment period ends 10 March 2023.

Influencing process

Project Preparation

Project preparation (continued)

Communications

Preparation of documents for public comment

Project finalisation and project closure

Conclusion

The IASB ED was published on 9 January 2023 with a comment deadline of 10 March 2023. The influencing project was organised to ensure the UKEB comment letter is informed by views from UK stakeholders while still meeting the IASB's comment deadline. To achieve this the DCL was issued for a short (7-day) comment period, and the FCL was presented as a late paper to the Board at an extraordinary meeting.

In the Secretariat's opinion, overall, this project complies with the applicable due process steps, as set out in the Handbook at the time of writing.

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Footnotes