Turkey sees company balance sheets inflation-adjusted until 2026

A man walks towards the entrance of OzdilekPark Shopping Center in the business and financial district of Levent, which comprises of leading Turkish banks’ and companies’ headquarters, as the outbreak of the coronavirus disease (COVID-19) continues, in Istanbul, Turkey September 8, 2020. REUTERS/Murad Sezer/File photo Acquire Licensing Rights

ISTANBUL, Oct 25 (Reuters) – Turkish companies’ end-2023 balance sheets will be inflation-adjusted, with adjustments expected to continue until 2026 in light of current inflation forecasts, the Treasury told Reuters.

The move comes after Turkish inflation soared above 85% last year following an aggressive rate-cutting cycle that sparked a currency crash in late 2021. Inflation subsequently declined but rose again in recent months, standing at 61.5% in September.

In written answers to questions from Reuters, the Treasury said any profit or loss resulting from inflation adjustments in end-2023 balance sheets would not affect companies’ 2023 tax bases but could affect them in subsequent years.

The Treasury made the comments after its revenue administration published a draft regulation last week detailing a move to inflation accounting, marking a return to the practice after a break of about 20 years.

In the last two years, companies have sought to protect themselves from high inflation and those which have turned to non-monetary fixed assets are expected to receive higher profits and pay correspondingly higher taxes in 2024.

Treasury and Finance Minister Mehmet Simsek has led a return toward more orthodox economic policies since his appointment following May elections.

The central bank has meanwhile hiked interest rates by 2,150 basis points to 30% to counter inflation after years of loose policy.

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