Cross-border Tax Talks

Accounting for Pillar Two: More than a tax exercise

Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Andy Wiggins, PwC Partner based in the United Kingdom and PwC’s Global Tax Accounting Services Leader to(birming)ham it up on the tax accounting implications of Pillar Two. Together they discuss, deferred accounting, the differences between US Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), accounting implications of the qualified domestic minimum top-up tax (QDMTT), income inclusion rule (IIR), and undertaxed profits rule (UTPR), country by country reporting (CbCR), and transitioning from the full safe habor to GloBe rules. 

Timestamps:

• 1:15 – Why did Andy choose to live in Birmingham? 
• 2:30 – Why is Pillar Two important for public multinationals from an accounting perspective?  
• 3:55 - What are some of the differences between the US GAAP and IFRS when it comes to Pillar Two accounting? 
• 5:55 – Is the no deferred accounting rule just temporary? 
• 8:40 – Why have the ISB and FASB approached accounting differently?  
• 11:35 – What should taxpayers be thinking about in terms of materiality from a Pillar Two perspective? What about group v. statutory accounts?  
• 14:40 – How should taxpayers think about risk assessment around Pillar Two? 
• 16:50 – Is a company’s internal process included as a part of the risk assessment? 
• 17:40 – How should companies be accounting for the QDMTT? 
• 19:25 – How should companies be accounting for the IIR?  
• 20:20 – How should companies be thinking about to prepare for Q1 of the UTPR?  
• 22:00 – Why are input and data sources important from a Pillar Two Accounting perspective?  
• 24:45 – What should taxpayers be thinking about from an output perspective, specifically the detailed calculations under the transitional safe harbors? 
• 26:05 – What are the challenges with determining a reporting group for Pillar Two, and specifically who is the ultimate parent entity? 
• 27:45 – Turning to the transitional safe harbor, what is the top down v. bottom up approach for the CbCR reporting process? And what are the considerations for a qualifying CbCR? 
• 31:20 – What should taxpayers be considering when moving from the transitional safe habor to the full GloBE rules?  
• 33:30 – What are some best practices for Tax teams partnering with Accounting teams when it comes to Pillar Two? Any general advice?  

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