Executive Summary
- Focus Difference: Turkish GAAP calculates the tax to be paid to the state; IFRS shows the cash flow your company will generate in the future.
- Hidden Liabilities: Debts not visible in Turkish GAAP balance sheets (Severance Pay, etc.) come to the surface in IFRS.
- Real Asset Value: Fixed assets at historical cost show the company as poor; IFRS reflects the company's potential with "Fair Value".
The most frequently asked question by bosses and managers is: "My accountant says we're making a profit, we're paying taxes, but why is there no money in the cash register?"
The answer is simple but painful: Because you're looking at the wrong map.
Companies in Turkey legally keep records according to the Tax Procedure Law (Turkish GAAP). However, Turkish GAAP is based on the tax security of the treasury, not the commercial reality of the company. If you make management decisions based on Turkish GAAP tables, you are probably managing your company with "tax glasses". However, global players manage with "investor glasses" (IFRS).
So, what are the technical differences between these two worlds that will change your company's destiny?
1. Hidden Debt Burden: Severance Pay Provisions
In Turkish GAAP logic, for an expense to be written, that money must leave the cash register or be finalized. Therefore, until your employee leaves the job, you cannot see the accumulated severance pay burden as "debt" in the Turkish GAAP balance sheet.
IFRS Reality: IFRS (IAS 19) says "The company is incurring debt as the employee provides service." It calculates the compensation that the employee will be entitled to in the future today through actuarial calculations and writes it to the balance sheet as "Provision".
Result: A company that appears profitable in Turkish GAAP may realize that it is actually under a serious compensation obligation when converted to IFRS. We call this "the balance sheet confrontation".
2. Fixed Assets and Depreciation Illusion
Turkish GAAP orders you to allocate depreciation to a machine or building at the periods and rates determined by the state. And you usually keep assets (except inflation adjustment) at historical cost.
IFRS Reality: IFRS (IAS 16) asks "What the state says doesn't matter, how long will you use this machine economically?" Useful life estimation is in management's hands. Also, IFRS allows you to track your assets with the "Revaluation" model, not "Cost".
Result: A factory building purchased years ago may appear at "garbage" value in Turkish GAAP records, while in IFRS reporting it becomes a power that increases the company's equity enormously. Your collateral power increases when using credit.
3. When Is Revenue Revenue? (Revenue Recognition)
For Turkish GAAP, if an invoice is issued, the sale has occurred. However, modern commerce is complex; warranties, returns, deferred sales are intertwined.
IFRS Reality: IFRS 15 asks "Has the customer taken control and have you fulfilled your performance obligation?" It separates the "maturity difference" (interest income) in deferred sales from revenue (Discounting).
Result: Some of the figures that appear as "Operational Profit" (EBITDA) in Turkish GAAP tables are actually financing income. IFRS separates your operational success from your financial success.
Dizdar Audit Opinion: Solving Complexity with Technology
Don't let these technical differences intimidate you. Yes, there is a chasm between Turkish GAAP and IFRS. However, as Dizdar Audit and Software Trading Inc., we are turning this chasm into a bridge.
We completely automate the "Turkish GAAP to IFRS Conversion" process, which used to take months and get lost in Excel tables, with the software technologies we have developed. We combine the quality understanding of international standards (Big 4) with the agility of local technology; we meet you not with template reports, but with real and fast solutions.
You focus on growing your business; let us calculate how that business will look at global standards.
Remember: Correct reporting is the cheapest source of financing.