Executive Summary
- Lease Revolution: With IFRS 16, operating leases (office, vehicle, warehouse) are no longer "expenses" but appear as "debt" on the balance sheet.
- EBITDA Impact: Since lease expense disappears, your operating profit (EBITDA) increases, but your debt ratios rise.
- Tax Engineering: These differences between Turkish GAAP and IFRS make the "Deferred Tax" mechanism critical.
In the first article of our series, we touched on the basic differences. However, as we dive deeper into the IFRS world, we come to topics where companies managed with Turkish GAAP logic really struggle, and manual calculations fall short.
Especially for retail, logistics and manufacturing sectors, TFRS 16 (Leases) is not an accounting standard, it's a financial management crisis.
1. Your Office and Vehicles Are Now "Debt" (IFRS 16)
In Turkish GAAP, you write the rent invoice you pay each month as "Expense" and move on. It's simple. However, IFRS looks at it from the perspective of economic ownership. "If you leased this building for 5 years, you actually bought 5 years of usage rights and incurred a 5-year debt in return," it says.
How Does the Table Change?
On Balance Sheet: "Right-of-Use Asset" appears on assets, and "Lease Liability" appears on liabilities. The company suddenly appears larger but more indebted.
On Income Statement: There is no longer "Lease Expense". Instead, there is "Depreciation Expense" and "Interest Expense".
Software Need: Tracking this calculation in Excel (especially if there are multiple leases) with changing exchange rates, interest rates and contract terms each month is nearly impossible.
2. Future Tax: Deferred Tax (IAS 12)
This is the item that bosses understand the least but affects the company's net profit the most. Every difference between Turkish GAAP and IFRS (Severance pay, Depreciation, Leases, etc.) creates a difference between the tax "paid today" to the state and the tax "actually incurred".
If your company is at a loss according to IFRS but profitable according to Turkish GAAP; it means you have "prepaid tax" (Deferred Tax Asset). This means your company will pay less tax in the future and is an "Asset". Not calculating this means showing your company as less valuable than it is.
3. Are Stocks Really Worth That Much? (IAS 2)
In Turkish GAAP, stocks at cost price can lose value as they wait on the shelf, or go out of fashion.
While Turkish GAAP says "Wait until you sell"; IFRS says "No, if the market price has fallen below cost, you will write that loss today" (Prudence Principle). Although this reduces your profit today, it allows you to present an honest picture to investors.
Dizdar Audit and Technology Solution
What we've described (TFRS 16 discount calculations, Deferred Tax bases) carries a 90% error risk when done manually.
This process, which even large audit firms (Big 4) often try to solve with crowded teams and complex Excel tables for days; we overcome in seconds with the technology we have developed as Dizdar Audit and Software Trading Inc.
With our Turkish GAAP > IFRS Conversion Software:
- Full Automation: You enter your lease contracts into the system, all IFRS 16 records (interest/depreciation breakdown) are automatically created.
- Smart Calculation: Deferred tax calculations are done error-free by the system based on Turkish GAAP and IFRS differences.
Instead of struggling with complex formulas and cumbersome processes, focus on managing the result.