Amendments to the IFRS for SMEs Accounting Standard—International Tax Reform—Pillar Two Model Rules

The IASB met on 3 May 2023 to discuss narrow-scope amendments to Section 29 of the IFRS for SMEs Accounting Standard (‘Income Tax’), after its tentative decisions to finalise the amendments to IAS 12 Income Taxes proposed in the Exposure Draft International Tax Reform—Pillar Two Model Rules (see Supplementary IASB Update April 2023).

The IASB tentatively decided to propose amendments to the IFRS for SMEs Standard:

1. to introduce a temporary exception to the requirements in Section 29 of the Standard for an entity to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes;
2. to make the temporary exception mandatory;
3. not to specify how long the temporary exception will be in place;
4. to require an entity to disclose that it has applied the temporary exception; and
5. to require an entity to apply these amendments immediately upon their issuance and retrospectively in accordance with Section 10 of the Standard (‘Accounting Policies, Estimates and Errors’).

All 14 IASB members agreed with these decisions.

The IASB tentatively decided to propose amendments to the IFRS for SMEs Standard to require an entity:

1. to disclose separately its current tax expense (income) related to Pillar Two income taxes; and
2. to apply this disclosure requirement for annual reporting periods beginning on or after 1 January 2023.

All 14 IASB members agreed with these decisions.

The IASB tentatively decided:

1. to clarify that ‘other events’ in the disclosure objective in paragraph 29.38 of the IFRS for SMEs Standard covers Pillar Two legislation, including in periods when it has been enacted or substantively enacted but is not yet in effect.
   All 14 IASB members agreed with this decision.
2. to include this clarification in the body of the IFRS for SMEs Standard (not only in the Basis for Conclusions).
   Seven of 14 IASB members agreed with this decision. The Chair used his additional casting vote, making the vote eight–seven in favour of the decision.
3. to introduce no new disclosure requirements in periods in which Pillar Two legislation has been enacted or substantively enacted but is not yet in effect.
   All 14 IASB members agreed with this decision.

The IASB tentatively decided to make consequential amendments to Section 35 of the Standard (‘Transition to the IFRS for SMEs’).

All 14 IASB members agreed with this decision.

The IASB tentatively decided to allow a comment period of 45 days for the exposure draft of proposed amendments to the IFRS for SMEs Standard (subject to approval by the Due Process Oversight Committee).

All 14 IASB members agreed with this decision.

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 an exposure draft.

No IASB member indicated an intention to dissent from publishing an exposure draft.