The Financial Reporting Council (FRC) has issued a financial reporting exposure draft (FRED) on the reporting of deferred tax. The FRC approach in the proposal mirrors the suggestion of the International Accounting Standards Board (IASB) to amend IAS 12. This introduces a temporary exception from the requirement to account for deferred taxes arising from the Pillar Two rules.
Draft amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland – International tax reform – Pillar Two model rules sets out the text of the proposed accounting standard. The FRC proposals are to amend Section 29 Income Tax of FRS 102, The Financial Reporting Standard, applicable in the UK and Republic of Ireland with a temporary exception from the requirement to account for deferred taxes arising from the Pillar Two rules. A decision will be made in future whether to remove this exception or make it permanent. The FRED follows the publication by the Organisation for Economic Co-operation and Development (OECD) of its Pillar Two model rules which aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate.
The proposals are subject to consultation which ends on 24 May 2023 with the intention of finalizing any resulting amendments in summer 2023.