Global implementation of Pillar Two: Impact on deferred taxes and financial statement disclosures

The updated publication has been expanded to include practical examples and insights regarding the global implementation of Pillar Two and the OECD's Pillar Two model rules. Applying the rules and determining the impact are likely to be very complex, and this poses a number of practical challenges for preparers of financial statements in accordance with IFRS Accounting Standards or Swiss GAAP FER.

Key points

• In December 2021, the Organisation for Economic Co-operation and Development (‘OECD’) released the Pillar Two model rules to reform international corporate taxation that aim to ensure that applicable multinationals (global revenue exceeding EUR 750 million) pay a minimum effective corporate tax rate of 15%.
• The rules are due to be passed into national legislation based on each country’s approach, and some countries have already enacted or substantively enacted the rules. Applying the rules and determining the impact are likely to be very complex, and this poses a number of practical challenges.
• In May 2023, the International Accounting Standards Board (IASB) issued narrow-scope amendments to IAS 12, ‘Income Taxes‘ that provide temporary relief from accounting for deferred taxes arising from the implementation of the Pillar Two model rules. Targeted disclosure requirements were also introduced. Jurisdictions subject to an endorsement process will need to endorse the amendments.
• For preparers of financial statements in accordance with Swiss GAAP FER, the standard setter has not issued any specific guidance on accounting for and disclosing effects from Pillar Two. According to the Swiss Expert Association for Audit, different approaches may be applied.