The Dilemma of Annual Reporting for Turkish Companies for 2022

Turkey has had another year of high inflation and high devaluation in its economic history. Inflation has been a continuing phenomenon in Turkey for many years. The paper analyzes the consequences of high inflation and devaluation rates on financial statements. Inflation and devaluation create difficulties both for local and foreign subsidiary companies` financial reporting. A model company`s transactions have been used to show the effects of inflation, devaluation on the financial statements. Application of different IAS based reporting methods will create discrepancies among the companies of foreign subsidiaries. Another discrepancy is due to which inflation rate to be applied for IAS 29 purposes. There are two inflation rates being discussed by the public. One is declared by the government statistical agency called “TurkStat” and the other one declared by the non-governmental academicians` organization called “ENAG”. ENAG`s inflation rate-being more than twice of the TurkStat`s makes the case even more interesting. Since government is not going to allow the inflation accounting rules for financial reporting for local/tax purposes for 2022 fiscal year, companies with revenues exceeding expenses and assets exceeding their liabilities will be declaring profits and paying taxes whilst in fact, high inflation and devaluation are sweeping away those profits.