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The Pillar Two Model Rules, released in December 2021, are part of the two-pillar solution to address the tax challenges of the digitalisation of the economy, and are designed to ensure large Multinational Enterprises (MNEs) pay a minimum level of tax on the income arising in each jurisdiction where they operate. Once the Pillar Two Model Rules are enacted in India, these amendments would be relevant to the non-company entities applying Accounting Standards issued by the ICAI and to whom Pillar Two Model Rules would be applicable. In order to help such non-company entities ease into the application of the principles and requirements of AS 22 (issued by ICAI), to account for deferred taxes related to top-up taxes, ICAI has issued the following temporary exceptions to the requirements in AS 22 (issued by ICAI):

The amendments introduce:

  • A temporary exception to the requirements to recognise and disclose information about deferred tax assets and liabilities related to Pillar Two income taxes; and
  • Targeted disclosure requirements for affected entities.

The amendments are effective for annual reporting periods beginning on or after 1 April 2024.

To access the text of the amendments, please click here

Action points for auditors

  • Auditors of non-company entities that are a part of larger groups, would need to assess the status of the pillar two implementation in the countries where the group operates at the interim reporting date. Where these amendments become applicable, companies would need to determine how to reflect the current top-up tax and what information to disclose.
  • Auditors of non-company entities would also need to reflect the impact of the changes in tax laws in their impairment assessments.

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