The Communiqué on the Financial Statements to Be Used by Companies Applying Inflation Adjustment was published in Official Gazette No. 32577 of 15 June 2024.
The “Communiqué on the Financial Statements to Be Used by Companies Applying Inflation Adjustment” was published in Official Gazette No. 32577 of 15 June 2024.
The explanations provided in the Communiqué are summarised below:
1) Financial statements to be used
1.1) Companies within the scope of the Public Oversight Authority
For companies required to prepare their financial statements in accordance with the accounting standards determined by the Public Oversight, Accounting and Auditing Standards Authority, the inflation-adjusted financial statements prepared under Article 88 of the Turkish Commercial Code, entitled “Authority of the Public Oversight, Accounting and Auditing Standards Authority”, will be used.
1.2) Companies outside the scope of the Public Oversight Authority
For companies outside that scope, both the financial statements to which inflation adjustment has been applied under temporary Article 33 of the Tax Procedure Law on inflation adjustment and Tax Procedure Law General Communiqué No. 555, and the financial statements to which inflation adjustment has not been applied, will be taken into account together for the 2023 accounting period. In this context:
a) inflation-adjusted financial statements will be used for the distribution of dividends out of the amounts remaining from free reserves and other distributable resources after the offsetting of losses, for capital increases and reductions, for mergers, demergers and conversions of legal form, and for determining capital loss and insolvency;
b) financial statements without inflation adjustment will be used where net profit for the period is the basis under the law or the articles of association: for distributions of profit and dividends, for setting aside reserves, for payments to holders of redeemed shares, and for calculations relating to interim dividends distributed during the period.
1.3) Application in accounting periods after the 2023 accounting period
For companies outside the scope of the Public Oversight Authority, inflation-adjusted financial statements will be used in accounting periods after the 2023 accounting period; however, the dividend amount proposed for distribution may not exceed the total of the resources available for profit distribution in the inflation-adjusted financial statements.
2) Capital
The Communiqué clarifies the amount to be taken into account in assessments relating to a company’s capital, the treatment of positive and negative differences arising from inflation adjustments, and which resources may be used in a capital increase.
Accordingly:
2.1) Assessment of capital
In assessments relating to a company’s capital, the capital amount registered with the trade registry will be taken as the basis.
2.2) Addition of positive differences to capital
Positive capital adjustment differences arising from inflation adjustment, positive differences relating to other equity items and other internal resources may be added to capital to the extent they exceed losses (including losses arising from inflation adjustment) and negative differences.
2.3) Offsetting of negative differences
Negative capital adjustment differences arising from inflation adjustment, and other negative differences arising from inflation adjustment, may be offset by way of a capital reduction, or against positive differences or other internal resources, pursuant to a resolution of the general assembly.
2.4) Capital increase
In capital increases carried out by companies required to prepare their financial statements in accordance with the accounting standards determined by the Public Oversight Authority, inflation-adjusted financial statements are used, but the amount of internal resources to be added to capital may not exceed the total of the internal resources available for addition to capital in the financial statements adjusted for inflation under the provisions of the Tax Procedure Law.
3) Tax obligations
The provisions of the relevant legislation on the tax obligations of the company and of those entitled to a share of the profit are reserved in relation to decisions taken on the matters explained above.