The question a Turkish company actually faces is not whether to apply international or Turkish standards — those are the same text. It is which of three reporting frameworks applies once the company comes into audit scope, and how far the resulting statements will diverge from the tax books it will continue to keep alongside them.
This page sets out the three frameworks and who applies each, the differences from the tax basis that create the largest reconciling items, the inflation accounting divergence currently in force, and what first-time adoption involves.
The Three Frameworks
| Framework | Who applies it | Character |
|---|---|---|
| Turkish Financial Reporting Standards | Public interest entities, companies required to apply them, and companies electing to do so — typically where a foreign parent consolidates on international standards | The full set; identical in content to the international standards |
| Standard for Large and Medium-Sized Entities | Companies in audit scope that are not required to apply the full set | A single self-contained standard, materially simpler; the framework most audited Turkish companies use |
| Standard for Small and Micro Entities | Entities outside audit scope that choose or are required to report on a framework basis | Further simplified, aimed at smaller entities |
| Tax-basis statutory books | Every company, always | Kept under the tax legislation; the basis for the return, not for the audit opinion |
The Turkish standards are the authority’s translation of the international ones. They carry the same recognition and measurement requirements, and a set of statements prepared under one is prepared under the other. Describing them as differing because one is adapted to local conditions is inaccurate and sends companies looking for differences that do not exist.
The choice that has real consequences is between the full standards and the standard for large and medium-sized entities. That one changes what has to be measured at fair value, whether deferred tax is recognised, how leases are treated and how much disclosure is required — and it determines the cost of the first audited year.
Full Standards or the Simplified Standard
Full standards
- Scope
- The complete set of standards and interpretations
- Deferred tax
- Recognised
- Leases
- Brought onto the balance sheet
- Fair value
- Required in a wider range of cases
- Disclosure
- Extensive
- Chosen when
- Required, or the group consolidates on this basis
Standard for large and medium entities
- Scope
- One self-contained standard
- Deferred tax
- Recognition is narrower
- Leases
- Treatment is simpler
- Fair value
- Cost basis used more widely
- Disclosure
- Substantially reduced
- Chosen when
- In audit scope with no requirement or group need for the full set
Where a foreign parent consolidates its Turkish subsidiary on international standards, applying the full set locally usually costs less overall than maintaining a separate group reporting pack on top of a simplified local one. Where there is no such parent, the simplified standard is almost always the right answer and choosing the full set by default adds cost without adding a reader.
Where the Framework Diverges From the Tax Books
Coming into audit scope does not replace the statutory books. It adds a second basis of preparation, and the two will not agree. These are the items that generate most of the reconciliation.
| Item | Under the reporting framework | Under the tax basis |
|---|---|---|
| Severance liability | Measured on actuarial assumptions and recognised in full | Recognised when paid; provisions are not deductible |
| Depreciation | Over useful life as assessed by management, with residual value | Over the periods set by the administration’s schedule |
| Impairment | Recognised when the recoverable amount falls below carrying value | Deductible only in the limited cases the legislation allows |
| Doubtful receivables | Expected credit losses recognised | Deductible only where the statutory conditions for a doubtful receivable are met |
| Deferred tax | Recognised on temporary differences under the full standards | Not a concept in the tax books |
| Revenue | Recognised when control transfers, with variable consideration estimated | Follows the invoice and delivery rules of the tax legislation |
| Foreign currency | Translated at the closing rate with differences in profit or loss | Valued under the tax legislation’s own rules |
| Inflation accounting | Applied while the economy is treated as hyperinflationary | Suspended for the 2025, 2026 and 2027 periods |
Inflation adjustment under the tax legislation does not apply for the 2025, 2026 and 2027 accounting periods, regardless of whether the statutory conditions are met. The reporting framework has no such suspension: while the economy continues to be treated as hyperinflationary, the statements prepared under the framework are restated.
The result is that audited financial statements and tax books are moving apart on a basis that affects every non-monetary balance — fixed assets, inventory, equity — rather than a handful of line items. Companies that built their reconciliation while both bases were adjusting in 2023 and 2024 will find it no longer works, and the difference grows with each period the suspension continues.
First-Time Adoption
- An opening balance sheet is prepared at the date of transition
- Accounting policies are selected and applied consistently across all periods presented
- Comparative figures are restated onto the new basis
- Differences arising on transition are recognised in equity, not in profit or loss
- Property, plant and equipment may be measured at deemed cost in defined cases
- The severance liability is measured actuarially, often for the first time
- Reconciliation to the tax basis is documented and becomes a recurring process
- Where the group reports internationally, local and group policies are aligned at this point
The work is front-loaded. Almost all of it concerns periods that have already closed, and it has to be done whether the company prepared for it or not. Doing it before the first audited year begins costs a fraction of doing it afterwards, because the records can still be assembled while the people who know them are available and the underlying documents are at hand.
Common Mistakes
- Looking for differences between the international and Turkish standards. They carry the same requirements; the Turkish set is the authority’s translation.
- Assuming the full standards are the only option. Most audited Turkish companies apply the simplified standard for large and medium-sized entities.
- Electing the full standards without a reader who needs them. Where no parent consolidates on that basis, the additional cost buys nothing.
- Expecting the audited statements to agree with the tax return. They are prepared on different bases and reconciliation is a standing task.
- Carrying a reconciliation prepared for 2023 or 2024 into 2025 onwards. Inflation adjustment stopped on the tax side and continues under the framework.
- Leaving policy selection to the auditor. Policies are management’s choice and the auditor cannot select them for the company.
- Measuring the severance liability for the first time during the audit. The actuarial calculation should be commissioned before the year-end, not during fieldwork.
- Starting transition work after the first audited year has closed. The opening balance sheet concerns periods already past, and reconstructing them late is the expensive version.
Frequently Asked Questions
What is the difference between the international and Turkish reporting standards?
Which framework applies to a company in audit scope?
Do the reporting standards replace the tax books?
What are the main differences from the tax basis?
Does inflation accounting still apply?
What does first-time adoption involve?
Can a company outside audit scope apply these standards?
Who selects the accounting policies?
As the Ozbek CPA team, we prepare and maintain financial statements under the Turkish reporting frameworks — determining which framework applies, selecting accounting policies, preparing the opening balance sheet and restating comparatives on first-time adoption, building and maintaining the reconciliation to the tax basis, and aligning local reporting with a foreign parent’s group policies. See also our pages on independent audit, auditing in Turkey and accounting services. Contact us.
