CMB’s Decision on TAS 29 and Inflation Accounting for Issuers and Capital Market Institutions

Under the Capital Markets Board Decision dated March 7, 2024, and numbered 14/382, the Capital Markets Board Decision dated December 28, 2023, and numbered 81/1820 (Board Decision) was published in the Capital Markets Board Bulletin dated 07.03.2024 and numbered 2024/14. The Capital Markets Board (CMB) made important announcements regarding the transition to inflation accounting for issuers and capital market institutions subject to financial reporting regulations, starting from the accounting periods ending as of 31.12.2023. These changes include exemptions, disclosure requirements, and equity presentations, retained earnings, inflation adjustment items in profit distribution, and capital increases under “Turkish Accounting Standard 29 Financial Reporting in Hyperinflationary Economies” (TAS 29). The important issues within the scope of the Board Decision are summarized below:

• Mutual funds will not apply inflation accounting in their financial statements prepared following the TMS/TFRS, taking into account the provisions of the General Communiqué on Tax Procedure Law dated 20.02.2024 and numbered 165.
• For 2023 financial statements, the board of directors and managers responsible for the financial reporting of issuers are authorized to disclose non-inflation-adjusted financial report information to investors (analysts). This information should be limited to the purpose of enabling the evaluation of significant expectations/assumptions and should not constitute a complete disclosure of the information included in the financial statements. In addition, it is stated whether this information has been independently audited and the necessary material disclosures should be made on the Public Disclosure Platform within the framework of public disclosure regulations.
• The accounting actions required to be taken about inflation-adjusted financial statements within the scope of TAS 29 such as “Paid-in Capital Account”, “Adjustment to Share Capital”, “Effect of Mergers Involving Enterprises or Businesses Under Common Control”, “Revaluation and Measurement Gains (Losses)”, “Restricted Reserves”, “Legal Reserves”, “Share Premium (Discounts)”, “Prior Years’ Profits or Losses” are listed.
• It specifies the necessary issues to be taken into consideration in transactions such as dividend distribution, offsetting, and capital increase to be made by issuers that will prepare inflation- adjusted financial statements. In this context, it is also stated that it is the responsibility of the issuer and the board of directors to check that the dividend amount to be distributed is included in the dividend distribution items in the legal records as a result of inflation adjustment and that it is subject to distribution, and to make the offsetting transaction in the legal records.

With the Board’s Decision, the following CMB Decisions and Announcements were abolished:

• Parts 1 and 2 of the announcement published in the CMB Weekly Bulletin numbered 2003/63
• Paragraphs B, C, D, and E of Section 2 of the announcement published in the CMB Weekly Bulletin No. 2004/10
• Part 2 of the announcement published in the CMB's Weekly Bulletin No. 2005/2
• CMB decision dated 17.03.2005 and numbered 11/367
• CMB decision dated 30.11.2016 and numbered 33/1162