Updated OECD guidance on country by country reporting (CBCR)

Thu 07 Dec 2017

The OECD has released updated guidance on implementing CBCR. The changes in this updated guidance compared to previous versions are noted below.

Updated guidance

Consolidated revenue

The guidance on the definition of consolidated group revenue (for determining whether the 750m threshold is met), already explained how to deal with differences in accounting rules of different jurisdictions concerning extraordinary gains from investment activities, and also whether gross or net amounts should be included for certain financial activities.

The new guidance states that an multinational enterprise (MNE) group complying with the accounting rules of the jurisdiction of the ultimate parent entity or surrogate parent entity in respect of the calculation of consolidated group revenue for the purpose of determining CBCR information should not be exposed to local filing in any other jurisdiction. This is dependent on the rules in the jurisdiction of the ultimate parent or surrogate parent entity being consistent with the OECD BEPS Action 13 minimum standard as supplemented by the OECD implementation guidance.

Short accounting period

The existing guidance indicated jurisdictions could permit a transitional period for extended reporting dates for short accounting periods.

The newly added guidance clarifies how to determine whether a multinational entity is within scope when its preceding financial year was shorter than 12 months. Jurisdictions can either:

• Use the actual consolidated revenue for that short accounting period;
• Adjust the consolidated revenue to what would correspond to a 12m period
• Calculate a pro-rata amount of the 750m that would correspond to the short accounting period.

The UK adopts the last of the three options.

New guidance

Negative accumulated earnings

Negative accumulated earnings should be reported without modification. Where there are two or more entities in the same jurisdiction, positive and negative accumulated earnings can be netted off, with an explanatory statement in table three.

Deemed listing provision

The guidance provides an explanation of the purpose of this provision. It deals with the situation where the ultimate parent entity is not required to prepare consolidated financial statements in the jurisdiction in which it is tax resident.  In this situation, the group consists of those entities which would be included in the consolidation, if the ultimate parent entity was a listed entity in its jurisdiction.

Treatment of mergers, acquisitions and demergers

Where a merger/acquisition/demerger occurs in a year, the figures for the previous year should not be adjusted in determining whether the group falls within the reporting requirement or is excluded. Where a group with a different accounting year end from its acquirer is acquired, whether it will be required to prepare consolidated financial statements covering a period to the date when it is acquired will depend on the jurisdiction of the target group’s original ultimate parent entity.  The CBCR reports of the acquirer should include a note in table three on whether or not the acquired groups prepares consolidated financial statements to the date of the acquisition.  This new guidance also includes a number of examples.

For further assistance on CBCR matters, please get in touch with a member of the Mazars International Tax team.