Income Tax Provision Template (IAS 12, ASC 740, ETR Reconciliation)

Income Tax Provision: [Group name] [Period end YYYY-MM-DD]

Income tax provision checklist and workpaper for annual and interim financial statements: scope and timetable, current tax computation, temporary differences and deferred tax roll-forward, deferred tax asset recoverability, uncertain tax positions, effective tax rate (ETR) reconciliation, Pillar Two top-up tax, interim tax, journal entries, disclosure checklist, review and sign-off. Structure aligned with IAS 12 Income Taxes (IFRS) and ASC 740 Income Taxes (US GAAP), including the disclosure changes of FASB ASU 2023-09 (public business entities: annual periods beginning after 2024-12-15; other entities: annual periods beginning after 2025-12-15). Requirements are referenced by standard and paragraph number only: obtain the standards for the normative text. Replace every [bracketed] value and every row marked Example. This is a document format, not tax, accounting, legal or financial advice.

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Contents

• 1. Scope, entities, rates and timetable
• 2. Provision process
• 3. Current tax computation
• 4. Temporary differences and deferred tax roll-forward
• 5. Deferred tax asset recoverability
• 6. Uncertain tax positions
• 7. Effective tax rate reconciliation
• 8. Pillar Two top-up tax
• 9. Interim period tax
• 10. Tax balances, journal entries and cash taxes
• 11. Disclosure checklist
• 12. Review, controls and sign-off
• 13. Glossary and references
• Standard and licence note

1. Scope, entities, rates and timetable

List every taxpaying entity and branch in the consolidation, the tax rate that applies to current tax for the period, and the rate expected to apply when temporary differences reverse. Under IFRS, use rates enacted or substantively enacted by the reporting date (IAS 12 paragraphs 46 and 47). Under US GAAP, use enacted rates only; the effect of a change is recognised in the period that includes the enactment date. Record the evidence for each rate (law reference, date of enactment) because the auditor tests it.

Rates as of 2026-10 for the fictional example; check local law at each reporting date. Where an entity has a preferential rate for a limited period, measure deferred tax at the rate expected when each difference reverses, which may be the standard rate.

1.1 Timetable

Agree the timetable with the close calendar in the Month-End Close Checklist (finance/month-end-close-checklist). Many groups run a "hard close" provision on the eleventh month of actuals and then true up for the final month, which keeps the tax team off the critical path at year end.

2. Provision process

Each entity package starts from the entity's profit before tax under group accounting policies, not under local GAAP. Permanent differences (items never taxable or deductible) and temporary differences (timing differences between the carrying amount and the tax base of assets and liabilities) are listed with their source. The return-to-provision step compares last year's provision with the tax return actually filed and books the difference as a prior-year adjustment; analyse it every year, because a repeated pattern of under-provision points to a control weakness in the provision process.

3. Current tax computation

Current tax is the amount of income tax payable or recoverable for the period (IAS 12 paragraph 12; ASC 740-10). Compute it per entity, then add prior-year adjustments, uncertain tax position charges and any top-up tax. Show the full computation for the material entities in the workpaper; smaller entities can use a short form with the same lines.

3.1 Entity example: Ostrander Deutschland GmbH (TX-002)

Example: The check is that total tax of 2.200 equals profit before tax at the local rate (6.300 x 30.0% = 1.890), plus the tax effect of the permanent item (0.200 x 30.0% = 0.060), plus the uncertain position (0.250): 1.890 + 0.060 + 0.250 = 2.200. The temporary difference moves tax between current and deferred but does not change the total. CT5 (1.890) is the German "income tax accrued" in CbC Table 1; the uncertain position in CT6 is excluded from that column.

3.2 Current tax by entity

Check: 66.180 + 6.300 + 4.500 + 3.630 + 9.390 = 90.000; 18.545 + 1.890

• 1.125 + 1.001 + 0.939 = 23.500; 23.500 - 0.250 + 0.250 - 0.100 = 23.400.

Example: The Netherlands figure is taxable profit of 71.880 (profit before tax 66.180, plus non-deductible items 7.700, less 2.000 of platform development costs deducted for tax faster than they are amortised in the accounts) at 25.8% = 18.545. The non-deductible items are share-based payment expense not deductible under the plan terms 3.200, an impairment of a minority shareholding covered by the participation exemption 2.900, and other items such as fines and the non-deductible part of mixed expenses 1.600 (Example; check the Dutch rules). The Netherlands prior-year adjustment of (0.250) is the return-to-provision true-up after the FY2025 return was filed. The United States figure is taxable profit of 4.004 (profit before tax 3.630, plus non-deductible items 0.310, plus 0.264 of accrued compensation not yet deductible, less 0.200 of loss carry-forward used) at 25.0% = 1.001, less a federal research credit of 0.100. Vietnam is 9.390 x 10.0% = 0.939.

The CbC "income tax accrued" column is current tax before adjustments less credits, per jurisdiction: 18.545, 1.890, 1.125, 0.901 and 0.939, total 23.400. The prior-year credit and the uncertain position charge are left out of CbC data; here they happen to offset, so consolidated current tax expense also equals 23.400. Reconcile the two figures every year, because they usually differ.

4. Temporary differences and deferred tax roll-forward

Deferred tax arises on temporary differences between the carrying amount of an asset or liability and its tax base (IAS 12 paragraphs 15 and 24; ASC 740-10). Build the schedule from the balance sheet: for each line with a difference, record the carrying amount, the tax base, the difference, the rate and the deferred tax. Then explain the movement between opening and closing balances.

4.1 Temporary differences at the reporting date

4.2 Roll-forward

Example: TD-001 grew from 12.00 to 14.00 (2.00 x 25.8% = 0.516 charge). TD-002 fell from 7.00 to 6.80 as provisions were used (0.20 x 30.0% = 0.060 charge). TD-003 grew from 1.00 to 1.16 (0.16 x 25.0% = 0.040 charge). TD-004: US losses of 2.40 at the start of the year are limited under IRC section 382 after a 2023 ownership change of OST-US (Example), with an annual limitation of 0.20, so 0.20 was used and 2.20 remain (0.20 x 25.0% = 0.050 charge). TD-005 grew from 0.50 to 0.764 (0.264 x 25.0% = 0.066 credit). The net movement is a charge of 0.600 to profit or loss (0.516 + 0.060 + 0.040 + 0.050 - 0.066), which is the deferred tax in CbC section 9.2 and in the master file. Total tax expense is current tax 23.400 plus deferred tax 0.600 = 24.000.

Present deferred tax assets and liabilities net only where there is a legally enforceable right of offset and they relate to the same taxation authority (IAS 12 paragraph 74). In this example the balances sit with four different authorities. The US items offset each other (0.550 + 0.191 = 0.741 asset), so the statement of financial position shows deferred tax liabilities of 3.902 (Netherlands 3.612, UK 0.290) and deferred tax assets of 2.781 (Germany 2.040, US 0.741), not the net figure of 1.121.

5. Deferred tax asset recoverability

Under IFRS a deferred tax asset is recognised to the extent that it is probable that taxable profit will be available (IAS 12 paragraphs 24, 34 to 36). Where an entity has a history of recent losses, convincing other evidence is needed (paragraph 35), and if it made a loss in the current or preceding period in the jurisdiction, the amount of the asset and the nature of the evidence are disclosed (paragraph 82). Under US GAAP all deferred tax assets are recognised and reduced by a valuation allowance if it is more likely than not that some part will not be realised. Weigh positive and negative evidence objectively and document the weighting.

Example: The US losses arose in FY2022 and FY2023. OST-US has been profitable since FY2024 and earns a routine distributor margin under transfer pricing policy TPP-001, so taxable profit of at least 0.20 a year is probable and the whole asset is recognised. Check the period over which the losses can be used: federal losses arising after 2017 carry forward indefinitely (check), so the section 382 limit delays use but does not cause expiry. Because OST-US made no loss in FY2025 or FY2026, the paragraph 82 disclosure does not apply this year. Use the same forecast that supports the impairment test and the Going Concern Assessment (finance/going-concern-assessment), adjusted for tax.

6. Uncertain tax positions

IFRIC 23 Uncertainty over Income Tax Treatments sets the IFRS approach: assume the authority will examine the position with full knowledge, decide whether it is probable that the treatment will be accepted, and if not, measure using the most likely amount or the expected value, whichever better predicts the outcome. US GAAP uses a two-step approach in ASC 740-10: recognise a benefit only if the position is more likely than not to be sustained on its technical merits (ASC 740-10-25-6), and measure it at the largest amount that is more than 50% likely to be realised on settlement. Interest and penalties follow the group policy (within income tax or within other expenses), applied consistently.

Example: UTP-001 relates to the group support service charge (SVC-002, TPP-003 in the Transfer Pricing Master File, finance/transfer-pricing-master-file), documented in the German local file TP-LF-DE-FY2026 prepared with Transfer Pricing Local File (finance/transfer-pricing-local-file). The total provision for the position at 2026-12-31 is 0.55, of which 0.25 is charged in FY2026. Keep the technical memo and adviser opinions in the evidence index; disclose the judgement if it is significant.

Uncertain tax positions are not covered taxes for Pillar Two until paid, so tag them separately in the provision tool so that the GloBE computation can exclude them.

7. Effective tax rate reconciliation

IFRS requires an explanation of the relationship between tax expense and accounting profit, either as a numerical reconciliation of tax amounts, of rates, or both, using the parent's domestic rate or an aggregate of local rates (IAS 12 paragraph 81(c)). US GAAP public business entities applying ASU 2023-09 must present a tabular reconciliation in both amounts and percentages, starting from the federal (national) statutory rate of the country of domicile, with specified categories shown separately and further disaggregation of items at or above 5% of the expected tax.

7.1 Reconciliation (IFRS, parent rate)

Example: The rate effect in R3 is the sum of each jurisdiction's profit times its rate difference from 25.8%: Germany 6.300 x 4.2% = 0.265; UK 4.500 x (0.8%) = (0.036); US 3.630 x (0.8%) = (0.029); Vietnam 9.390 x (15.8%) = (1.484). Total (1.284), most of it the Vietnamese preferential rate. Non-deductible expenses R4 combine the Netherlands 1.987 (7.700 x 25.8%), Germany 0.060 (section 3.1), the UK 0.040 (0.160 x 25.0%) and the US 0.078 (0.310 x 25.0%): 2.164 after rounding. Total: 23.220 - 1.284 + 2.164 - 0.100 - 0.250 + 0.250 = 24.000, and the effective tax rate is 24.000 / 90.000 = 26.67%; the percentages in the last column do not add exactly because of rounding. R6 stays in the table at zero because Vietnam passes the Pillar Two safe harbour only narrowly (section 8); R7 is zero because no previously unrecognised losses were recognised or derecognised (the UK capital losses in DTA-003 remain unrecognised).

7.2 Mapping to ASU 2023-09 categories (US GAAP reporters)

Example: If Ostrander reported under US GAAP with a Dutch domicile, the 5% threshold would be 5% x (90.000 x 25.8%) = 1.161. Vietnam's rate effect of (1.484) is above it, so Vietnam would be shown as a separate foreign jurisdiction; the Netherlands non-deductible items of 1.987 are also above it and would be disaggregated by nature (share-based payments 0.826, participation impairment 0.748, other 0.413). Germany's rate effect of 0.265 is well below the threshold. This mapping is illustrative: obtain ASU 2023-09 and ASC 740-10-50 for the full requirements, including the disaggregated income taxes paid disclosure.

8. Pillar Two top-up tax

The Pillar Two estimate comes from the Pillar Two GloBE Readiness Assessment (finance/pillar-two-globe-readiness). Under IFRS, apply the mandatory exception from deferred tax accounting for Pillar Two income taxes in IAS 12 paragraph 4A and give the disclosures in paragraphs 88A to 88D, including current tax related to Pillar Two shown separately. Under US GAAP, top-up taxes are generally treated as a period cost in ASC 740; agree the policy with the auditor.

Example: For FY2026 the transition rates for the substance-based income exclusion are 9.4% for eligible payroll and 7.4% for eligible tangible assets. Vietnam's eligible payroll is 86.400 and eligible tangible assets 18.000: SBIE = 86.400 x 9.4% + 18.000 x 7.4% = 8.122 + 1.332 = 9.454 (rounded), above CbC profit before tax of 9.390, so the top-up tax is deemed zero and no Pillar Two current tax is recognised. The margin of 0.064 is thin: as a shadow figure, if the safe harbour were lost and net GloBE income were 9.790 (CbC profit plus 0.400 of GloBE adjustments, as in the FY2025 shadow computation), the ETR would be 0.939 / 9.790 = 9.6%, the top-up percentage 15.0% - 9.6% = 5.4%, and the Vietnamese QDMTT about 5.4% x (9.790 - 9.454) = 0.018. Disclose the exception statement under IAS 12 paragraph 88A and state that current tax related to Pillar Two is nil (paragraph 88B). The lowest simplified ETR among the other jurisdictions is the US at 24.38% ((0.901 - 0.016) / 3.630), comfortably above 17%.

9. Interim period tax

For interim reports, tax expense is generally recognised using the best estimate of the weighted average annual income tax rate expected for the full year, applied to the interim period's pre-tax income (IAS 34 paragraphs B12 to B16; ASC 740-270 under US GAAP). Estimate the rate per jurisdiction where rates differ materially. Record one-off items (prior-year adjustments, changes in uncertain positions, enacted rate changes, recognition of previously unrecognised losses) as discrete items in the period they occur rather than spreading them through the estimated annual rate.

Example: The estimated annual ETR excluding discrete items is 24.000 / 90.000 = 26.67%, because the two discrete items offset over the year. 20.00 x 26.67% = 5.334; 42.00 x 26.67% = 11.201 (rounded); 66.00 x 26.67% = 17.602 (rounded); 11.201 - 0.250 = 10.951. The Netherlands true-up is booked in Q2, when the FY2025 return is filed, and the German uncertain position in Q3, when the audit findings arrive. The estimated annual rate is reassessed each quarter; at year end the actual computation in sections 3 to 8 replaces it.

10. Tax balances, journal entries and cash taxes

10.1 Current tax payable roll-forward

Example: 4.200 + 23.400 - 21.560 + 0.000 = 6.040. Cash paid of 21.560 is the "income tax paid" total in CbC Table 1. Refunds, when they occur, increase the payable because they reverse an earlier payment. Uncertain tax position provisions can be presented within current tax liabilities; state where they sit in the tie-out.

10.2 Journal entries

Example: TJE-002 combines TD-001 (0.516) and TD-003 (0.040); TJE-003 nets TD-002 (0.060), TD-004 (0.050) and TD-005 ((0.066)): 0.060 + 0.050

• 0.066 = 0.044. The net deferred effect is a charge to expense of 0.556 + 0.044 = 0.600. Support each entry with the schedules in sections 3 and 4, as described in Journal Entry Support (finance/journal-entry-support).

10.3 Cash taxes

Report income taxes paid net of refunds in the cash flow statement. Under ASU 2023-09, US GAAP reporters also disaggregate taxes paid by federal, state and foreign, and show any single jurisdiction at or above 5% of total income taxes paid. Keep a payments log per authority with dates and references so the disclosure and the reconciliation in 10.1 come from the same source.

11. Disclosure checklist

From annual periods beginning on or after 2027-01-01, IFRS 18 replaces IAS 1 and changes the presentation of the income statement; income tax remains a separate line, but check the new totals and subtotals with the IFRS 18 Transition Plan (finance/ifrs-18-transition-plan).

12. Review, controls and sign-off

Treat the provision as a key area in the internal control framework: the tax line is a frequent source of restatements and audit findings. Keep a clear audit trail from each figure in the note to its schedule, and from each schedule to the ledger or an approved memo. Give the auditor the evidence pack listed in the PBC Request List (finance/pbc-request-list) at the agreed date, and record significant judgements in the Management Representation Letter (finance/management-representation-letter) where the auditor asks for them.

12.1 Sign-off

13. Glossary and references

13.1 Glossary

13.2 References

Standard and licence note

Structure aligned with IAS 12 Income Taxes, IFRIC 23, IAS 34 and FASB ASC Topic 740 as amended by ASU 2023-09; these standards are cited by name and paragraph or topic number only, and no text, example or table from IFRS Foundation or FASB material is reproduced or paraphrased. Pillar Two references follow the OECD Side-by-Side Package (OECD, 2026, CC BY 4.0); this adaptation does not represent the official views of the OECD or of its Member countries. IFRS is a trade mark of the IFRS Foundation; this template is not affiliated with or endorsed by it or by the FASB. Ostrander Group N.V. and every figure are fictional. This template is original text written for this collection. Check the current official versions of the standards and each tax law before use. Template licence: MIT.