Supplementary IASB Update August 2023

Maintenance and consistent application

Amendments to the IFRS for SMEs Accounting Standard—International Tax Reform—Pillar Two Model Rules (Agenda Paper 12)

The IASB met on 23 August 2023:

• to consider feedback on the Exposure Draft International Tax Reform—Pillar Two Model Rules—Proposed amendments to the IFRS for SMEs Accounting Standard (Exposure Draft); and
• to decide how to proceed with the project given that feedback.

Temporary Exception to Deferred Tax Accounting (Agenda Paper 12A)

The IASB tentatively decided to finalise its proposals in the Exposure Draft:

1. to introduce a temporary exception to the requirements in Section 29 Income Taxes so that an SME would not:
   1. recognise deferred tax assets and liabilities related to Pillar Two income taxes; or
   2. disclose information that would otherwise be required by paragraphs 29.39–29.41 about deferred tax assets and liabilities related to Pillar Two income taxes;
2. to make the temporary exception mandatory; and
3. to specify no end date for the temporary exception.

All 14 IASB members agreed with these decisions.

The IASB also tentatively decided:

1. to require an SME within the scope of Pillar Two legislation to disclose that it has applied the temporary exception. Eleven of 14 IASB members agreed with this decision.
2. to make no change to the scope of the temporary exception to include the measurement of deferred taxes recognised under domestic tax regimes. All 14 IASB members agreed with this decision.

Disclosure Requirements (Agenda Paper 12B)

The IASB tentatively decided to finalise its proposals in the Exposure Draft:

1. not to introduce new disclosure requirements that would apply in reporting periods when Pillar Two legislation is enacted or substantively enacted but not yet in effect. Ten of 14 IASB members agreed with this decision.
2. to clarify that ‘other events’ in the disclosure objective in paragraph 29.38 of the IFRS for SMEs Accounting Standard include the enactment or substantive enactment of tax rates and tax laws, such as Pillar Two legislation. Nine of 14 IASB members agreed with this decision.
3. to require an entity to disclose separately its current tax expense or income related to Pillar Two income taxes. All 14 IASB members agreed with this decision.

Effective Date, Transition and Due Process (Agenda Paper 12C)

The IASB tentatively decided to finalise its proposals in the Exposure Draft to require an SME:

1. to apply the exception (proposed new paragraph 29.3A)—and disclose that it has applied the exception (proposed new paragraph 29.42)—immediately upon the issue of these amendments and retrospectively in accordance with Section 10 Accounting Policies, Estimates and Errors of the IFRS for SMEs Accounting Standard;
2. to apply the amended paragraph 35.10(h), which clarifies that a first-time adopter applies the exception in paragraph 29.3A retrospectively, immediately upon the issue of these amendments; and
3. to disclose separately its current tax expense (income) related to Pillar Two income taxes (proposed new paragraph 29.43) for annual reporting periods beginning on or after 1 January 2023.

Thirteen of 14 IASB members agreed with these decisions.

The IASB discussed due process steps and the request for permission to ballot amendments to the IFRS for SMEs Accounting Standard.

The IASB decided to finalise the amendments without re-exposure. All 14 IASB members agreed with this decision.

No IASB member indicated an intention to dissent from issuing the amendments, although one IASB member reserved his position.

All 14 IASB members confirmed they were satisfied the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the amendments.

Next step

The IASB expects to issue the amendments in September 2023.