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Inflation adjustments will be mandatory by 31.12.2023 in TURKEY!

Inflation accounting is the process of adjusting the non-monetary items in the financial statements of companies to reflect their purchasing power at the date of preparation of the financial statements by removing inflationary effects.


Inflation adjustment will be realized by multiplying the amounts of non-monetary assets to be taken into account in the inflation adjustment by the adjustment coefficients. In inflation adjustment, taxpayers shall fulfill the following procedures in order.


In summary, it aims to ensure that the assets of companies operating in high-inflation economies, which are devalued due to the current economic conditions, are included in the financial statements at their realistic values.


Inflation accounting, which was postponed to the end of 2023 with the amendment of the law despite the conditions in Turkey, will enter into force as of the end of 2023 unless it is postponed again. The Revenue Administration has published a draft Communiqué on Inflation Adjustment and continues to work on the draft.

How will the inflation adjustment be made step by step?


1) It will be determined which of the assets in the financial statement are non-monetary assets.

2) The amounts of non-monetary assets to be taken into account in the inflation adjustment will be found.

3) Adjustment dates and adjustment/transportation coefficients of non-monetary assets will be determined.

4) Amounts subject to adjustment shall be multiplied by the adjustment/carrying coefficients to which they belong and the adjusted amounts of non-monetary assets shall be calculated and the inflation differences between the adjusted values and the values before the adjustment shall be recorded.

5) Non-monetary assets shall be recognized at their restated values and monetary assets shall be recognized in the financial statements without restatement.


Is inflation adjustment taxable?


The restatement process will ensure that the financial statements reflect the real situation and will also have a tax reflection.


Financial statements dated 31/12/2023 are subject to inflation adjustment regardless of whether the conditions for inflation adjustment are met. The profit/loss difference arising from inflation adjustment is recognized in retained earnings. Retained earnings determined in this way are not subject to tax, and retained losses are not recognized as losses.


Adjustment transactions will not result in taxation for 2023, but will affect the tax to be calculated in 2024 and the following years, since the adjusted non-monetary items will be taken into account at their adjusted values in 2024 and the following years. Thus, with the correction of the end of the period in 2023, starting from 2024, inflation adjustment differences will be associated with the income statement and will directly affect the tax base.


Although inflation adjustment of inventories has an increasing effect on the profit for the period, subjecting them to sale with their cost values resulting from inflation adjustment will have a decreasing effect on the profit for the period.


Therefore, inflation adjustment does not mean that less tax will be paid, but it may cause more tax to be paid in some enterprises, and the tax effect of the adjustment will vary according to the structure of the enterprises.


Who will apply inflation accounting?


Those who do not keep their financial statements in TL, those who do not keep their records in foreign currency and the process of returning to TL does not exceed 3 years, those who keep books on a business basis and self-employed individuals do not have to make inflation adjustment. Inflation accounting is applied to accounts classified as non-monetary items such as fixed assets, inventories and equity. It is stated that inflation accounting will cause a positive outlook in terms of income statement in enterprises with strong fixed assets and stock items.

Melasoft SAP Inflation Accounting Solution Suite: A Strategic Tool


The Melasoft SAP Inflation Accounting Solution Suite is designed to address the multifaceted challenges of inflation accounting. Here’s how the suite stands out:


  • Automated Inflation Adjustments: The solution suite automates the complex process of recalculating financial statements for inflation, significantly reducing the potential for human error and saving valuable time.

  • Integration with SAP: As a comprehensive solution, the suite integrates seamlessly with SAP’s modules. This integration ensures a unified approach to financial reporting, from asset valuation to equity adjustments.

  • Real-Time Data Access: Melasoft’s suite provides access to real-time data, allowing for timely and accurate inflation adjustments that reflect the latest economic conditions.

  • Regulatory Compliance: With built-in compliance features, the suite aligns with both IFRS and local regulations, ensuring that companies meet their reporting obligations effortlessly.

  • Advanced Reporting Capabilities: The solution suite enhances reporting tools within SAP, providing detailed reports that clearly communicate the impact of inflation.

  • User-Friendly Interface: The suite offers a user-friendly interface, which simplifies the process for financial teams, minimizing the need for extensive training.

  • Streamlined Audit Process: With accurate, automated adjustments, the solution suite streamlines the audit process, reducing the risk of findings and restatements.


Conclusion


Inflation Accounting is a critical aspect of modern financial management, especially in volatile economic times. The SAP Inflation Accounting Suite offers an innovative, integrated solution that ensures compliance, accuracy, and reliability in financial reporting, making it an indispensable tool for businesses navigating the complexities of inflation.


Melasoft SAP Inflation Accounting Solution

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