The International Accounting Standards Board (IASB) has formally proposed amendments to IAS 12, Income Taxes, to take account of Pillar Two of the OECD’s base erosion and profit-shifting (BEPS) tax model and suspending rules on accounting for deferred taxes while its implications are assessed. The IASB has acted because the European Union agreed a directive in December 2022 to make Pillar Two rules compulsory in the EU. This will make multinationals (and large domestic companies) pay 15% minimum tax rates in member states where they trade.
The reason for the suspension is that complex tax adjustments may follow national tax assessments for multinationals, forcing them to pay top-up taxes in certain jurisdictions, delaying tax settlements. The proposed IAS 12 amendments would also require the declaration of information indicating what top-up adjustments may have to be made. A permanent reform to IAS 12 will follow once the IASB has determined the long-term impact of BEPS-related legislation. The board is seeking feedback by 10 March.
The IASB has announced its response to its review of IFRS 9 on financial instruments. While the IFRS 9 standard is working well, the IASB has decided some changes may be needed, such as guiding a company’s assessment of the contractual cashflow characteristics of financial assets with environmental, social and governance-linked features, and for electronic cash transfers when settling a financial asset or liability. The changes will also improve disclosures of fair value changes relating to equity instruments. The requirements for applying the effective interest method to financial instruments measured at amortised cost may also be clarified.
The International Sustainability Standards Board (ISSB) has issued guidance for companies disclosing material Scope 3 (indirect value chain) greenhouse gas emissions in accordance with its IFRS S2 standard on climate-related disclosures. The ISSB will require ‘the use of reasonable and supportable information that is available without undue cost or effort and incorporates the use of estimation’. The companies affected will also be given at least an additional year to implement the necessary processes.
Meanwhile, the Global Steering Group for Impact Investment (GSG) has released a system map offering high-level visual information about currently available resources for organisations, investors and financial institutions to manage their sustainability impacts.
The IFRS Foundation has signed an agreement with the Ministry of Finance of China to set up an IFRS office in Beijing for at least three years. The office is expected to open in mid-2023, and staff will focus on rolling out ISSB principles in emerging and developing economies, notably in Asia.
The International Ethics Standards Board for Accountants (IESBA) has released an overview of its new policies to create profession-agnostic independence standards for use by all sustainability assurance practitioners, and specific ethics provisions relevant to sustainability reporting and assurance. IESBA also announced it will stage four global roundtables this year to obtain the advice of the accounting profession on developing these standards.
The International Public Sector Accounting Standards Board (IPSASB) has welcomed ACCA’s support for its proposed development of a public sector-specific sustainability reporting framework. ACCA will help fund this process and work closely with the International Federation of Accountants (IFAC) and other public sector partners to help IPSASB develop these standards.
The International Auditing and Assurance Standards Board (IAASB) has started consulting on its 2024–27 proposed strategy and work plan. It will have four strategic objectives:
- supporting quality audit engagements by enhancing standards
- establishing globally accepted standards for assurance on sustainability reporting
- strengthening coordination with IESBA
- creating more agile and innovative work practices.
In other audit news, IFAC has released guidance to help auditors implement the International Auditing and Assurance Standards Board’s ISA 315 standard on identifying and assessing the risks of material misstatement. It provides an overview of core concepts and explains new and previously existing requirements.