No Match Found
The OECD’s Pillar Two is nearly upon us. Many jurisdictions will have local legislation enacted and effective for January 1, 2024. While local legislation is still being finalized in many countries, Pillar Two generally applies to multinational companies with revenue of at least EUR 750M, and requires companies to evaluate their tax expense through a data-intensive calculation process — a significant operational challenge that may result in tax expense increases for some companies. Additionally, readiness for the increased tax compliance complexity is top of mind for many companies and proper preparation can ease the burden.
Your business should act now. FASB and IASB have spoken — Pillar Two can be accounted for on a period-cost basis for US GAAP and IFRS, which means that calendar-year companies must disclose expected Pillar Two tax expense in their 2024 Q1 reporting. Get ahead of the game and prepare. Align with your financial statement auditor and lay the foundation for data, technology and process.
3. Scope material jurisdictions for full GloBE computation
Once you have completed these checklist items, you should be in a better position to understand the Pillar Two impact on revenues and tax expense at a jurisdictional level. Now you’re ready to start discussions with your auditor. Bring a point of view on how Pillar Two impacts your company and provide high-level direction on how you will calculate and account for the new rules in Q1 2024. Once you’ve gotten directional alignment with your auditor, you’re ready to execute and put your plan into action.
Avoid a last-minute and costly rush to establish your processes and calculations for Pillar Two in the coming year. Taking the following actions in November should put you on a strong footing:
1. Develop your detailed process steps for forecasting Pillar Two Tax in Q1, AETR and 2024 budgets.
2. Implement technology or workpaper strategy and develop an approach and supporting technology or data collection and mapping.
3. Develop processes and controls documentation for how you scoped and calculated your Pillar Two liability (or lack thereof) and for how you are and will continue to monitor legislative activity globally.
4. Perform mock closes or dry runs of Pillar Two calculations for your Constituent Entities in implementing jurisdictions and document key technical positions.
Discuss these action items with your auditor before year-end to ensure alignment. Get their input on the operational, data, system, process and computational frameworks you've established. Your plan will evolve, but starting strong in Q1 is crucial for managing the workload of Pillar Two in 2024. Stay ahead of the game and set yourself up for success.