Cross-border Tax Talks Accounting for Pillar Two: More than a tax exercise
Dec 19, 2024
Andy Wiggins, a PwC Partner and Global Tax Accounting Services Leader, discusses the nuances of accounting under Pillar Two. He dives into the challenges of navigating US GAAP versus IFRS and the impact of international tax reforms on financial statements. Topics include the complexities of the income inclusion rule and the significance of accurate data for compliance. Wiggins also emphasizes collaboration between tax and finance teams in adapting to new standards, addressing the importance of timely data preparation and the identification of the Ultimate Parent Entity.
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Pillar 2 Changes Accounting Landscape
- Pillar 2 accounting links tax payments directly to consolidated financial statements for the first time.
- This integration marks a significant shift in international tax and accounting processes.
US GAAP Vs IFRS on Pillar 2
- US GAAP treats Pillar 2 like the historic AMT, allowing deferred tax accounting.
- IFRS forbids deferred tax for Pillar 2 and requires additional disclosures due to global applicability challenges.
Assess Materiality at Correct Level
- Determine materiality based on consolidated or statutory financial statements depending on jurisdiction.
- Audit Pillar 2 exposure at appropriate granular statutory entity levels, especially for QDMTT.