Three sets of accounts, not two
Most foreign parents arrive assuming their Turkish subsidiary keeps one set of books that then gets "converted". It usually keeps up to three, and knowing which is which saves a great deal of argument later.
The statutory tax books. Kept under the Tax Procedure Law, on the Uniform Chart of Accounts, in Turkish and in Turkish lira. Measurement follows tax law, not an accounting framework. This is the set the tax authority sees and the only set that legally has to exist.
A Turkish financial reporting framework, if the company is in audit scope. Companies meeting the Public Oversight Authority's thresholds for independent audit prepare financial statements under TFRS — IFRS as adopted in Turkey — or, more commonly for mid-sized entities, under BOBİ FRS, the Turkish framework for large and medium-sized enterprises. BOBİ FRS is not IFRS and does not converge to it.
The group pack. IFRS, US GAAP or your own group manual, in your presentation currency, on your consolidation calendar.
The conversion work is between the first and the third. The second matters because if it exists, it is a third version of the truth that your auditors will see, and nobody enjoys explaining why three sets of numbers disagree.
What actually differs
The reconciliation between a Turkish statutory ledger and a group basis is not a long list of small items. It is a short list of large ones.
| Item | Turkish statutory position | IFRS / US GAAP |
|---|---|---|
| Deferred tax | Not recognised | Recognised in full |
| Severance (kıdem tazminatı) | Deductible when paid | Actuarial liability accrued |
| Operating leases | Expensed | On balance sheet under IFRS 16 |
| Depreciation | Rates set by the tax administration | Useful life and components |
| Receivables and payables | Rediscounted under tax rules | Discounted only if material financing |
| Impairment | Narrow, evidence-driven tax tests | Full expected-loss / impairment models |
| Revenue | Largely invoice-driven | IFRS 15 performance obligations |
| Inflation | See below — currently suspended for tax | IAS 29 still applies |
Three of these are worth spelling out.
Deferred tax. Turkish statutory accounts do not carry it at all. Every one of the differences above therefore creates a deferred tax consequence that exists only in the group pack. If deferred tax is computed once a year by someone who did not prepare the ledger, it produces audit adjustments. Computed monthly by the team that keeps the ledger, it does not.
Severance. Turkish law entitles most departing employees to severance based on length of service. Tax law allows a deduction only when the money is paid; IAS 19 requires the accrued obligation to be measured actuarially. For a company with long-serving staff this is one of the largest single reconciling items on the balance sheet, and it needs headcount and service data the statutory ledger does not hold.
Inflation. This is the one that has changed most recently and catches groups out.
What hyperinflation does to a Turkish subsidiary
Turkey has met the IAS 29 hyperinflation criteria since 2022, so under IFRS the financial statements of a Turkish entity must be restated in terms of the measuring unit current at the reporting date.
Turkish tax law ran its own inflation adjustment in parallel — and then stopped. Law No. 7571 added Temporary Article 37 to the Tax Procedure Law, suspending the inflation adjustment for income and corporate tax purposes for the 2025, 2026 and 2027 periods.
The accounting consequence is direct: the Turkish statutory accounts are no longer inflation-adjusted, while IAS 29 continues to apply to the group's IFRS figures. The gap that the tax adjustment used to narrow is now carried entirely in the conversion. A group whose Turkish component used to be nearly reconciled on this point now is not, and the difference grows every month it is ignored.
A related trap: a Turkish entity's functional currency is not automatically the Turkish lira. For a subsidiary that sells, prices, borrows and is funded in euro or dollars, the functional currency may well be that currency, which changes the whole translation question. The ledger has to be in lira because Turkish law says so. That is a legal requirement about the ledger, not a conclusion about the functional currency, and the two get confused constantly.
How we build it
The difference between a reporting service that works and one that does not is where the mapping lives.
At onboarding we map the chart of accounts once, properly. The Uniform Chart of Accounts will not match your group chart; nothing can make it. Built into the ledger at the start, the group pack falls out of the same monthly close. Built later, in a spreadsheet, by one person, it is rebuilt every month, understood by nobody else and impossible to audit — and that spreadsheet is the single largest source of error we find in foreign-owned Turkish subsidiaries.
Each adjustment is documented as a standing schedule, not a journal. Deferred tax, severance, leases, depreciation bridges, inflation restatement and FX translation each get their own schedule that carries forward. Your auditor can follow it and so can your successor.
The close runs monthly on an agreed date. Not "when the Turkish numbers are ready". You tell us the consolidation deadline; we tell you before you commit whether we can meet it.
What you get
- Monthly, quarterly and annual packages under IFRS, US GAAP or your own group accounting manual
- Conversion schedules from the Turkish statutory ledger to the group basis, each adjustment documented and carried forward
- Reporting in your group's format, in your presentation currency, on your calendar
- Current and deferred tax integrated into the monthly figures rather than added at year end
- Statutory financial statements under TFRS or BOBİ FRS where the company is in audit scope
- The Turkish component of your group audit — the request list answered in English, by the group's deadline
- Intercompany reconciliation and the supporting documentation that transfer pricing will need anyway
Where it goes wrong
The conversion is left to year end. Twelve months of differences arrive at once, in the same weeks as the Turkish statutory close and the audit. Everything found is an adjustment, and adjustments found in audit are expensive in ways that have nothing to do with fees.
Nobody owns the functional currency conclusion. It gets assumed rather than documented, and then challenged by an auditor two years later with retrospective effect.
The Turkish team reports to the Turkish calendar. Turkish statutory deadlines are not group deadlines and do not move. If the close is designed around the former, the group pack is always late by construction.
Severance and deferred tax are estimated. They are the two largest reconciling items in most Turkish subsidiaries and the two most often carried at a round number that nobody can support.
Who does the work
Baran Özongan set up and ran PwC's accounting services department in Ankara for five years, after more than five years at Mazars. Group reporting for the Turkish subsidiaries of international companies is not an add-on here — it is the work the practice was built around, across defence, energy, construction, services and information technology.
The reporting comes from the same team that keeps the statutory books and files the tax returns. That is deliberate: the reconciling items above are created in the ledger, and the cheapest place to deal with them is where they are created.
Frequently asked questions
Can you report under US GAAP as well as IFRS?
Yes, and the distinction matters more for a Turkish entity than for most. Hyperinflation is handled in opposite ways by IAS 29 and ASC 830, so the standard has to be settled before the mapping is built, not after.
Our group already has a reporting template. Can you just fill it in?
That is the normal arrangement. Send the template, the group manual and the deadline; we map to it and tell you what we cannot source from the Turkish ledger before we start.
Is Turkey still hyperinflationary for IFRS?
Turkey has met the IAS 29 criteria since 2022 and continues to be treated as hyperinflationary for IFRS purposes. The separate Turkish tax inflation adjustment is a different mechanism and is suspended for 2025 to 2027.
Does suspending the tax inflation adjustment mean less work?
The opposite. While both mechanisms ran, the statutory and IFRS positions moved in roughly the same direction. With the tax adjustment suspended and IAS 29 still applying, the whole difference sits in the conversion.
Who prepares the deferred tax — you or our auditors?
We do. Auditors audit it; they do not prepare it, and a deferred tax computation first seen in the audit is a finding waiting to happen.
Do we need TFRS or BOBİ FRS statements as well?
Only if the company falls within the Public Oversight Authority's independent audit thresholds, which are revalued periodically. We will tell you whether you are in scope and which framework applies — it is not a choice in most cases.
Can you take over a conversion that currently lives in a spreadsheet?
Yes, and it is a common starting point. We reconstruct the mapping from the ledger, reconcile it to the last reported pack, and tell you plainly where the two do not agree before anything is changed.
How quickly after month end can we have the pack?
That depends on when source data lands — bank statements, payroll, intercompany confirmations. Tell us your deadline and we will tell you whether it is achievable with your current data flow, and what would have to change if it is not.