Inflation Accounting and the Effect of Inflation on Financial Statements
Chapter from the book: Yücel, R. & Ayyıldız, Y. (eds.) 2024. Accounting in the Digital Age: Studies on Digitalization, Inflation, and Sustainability.

Hayreddin Özden
Bolu Abant İzzet Baysal University
Ayşe Ökdem
Bolu Abant İzzet Baysal University

Synopsis

Inflation accounting is an accounting method used to eliminate the effect of high inflation on financial statements. In an economy with inflation, the data in the financial statements prepared by the enterprises will not reflect the real situation of the enterprise. In order for the financial statements to reflect the real situation of the enterprise, some adjustments need to be made to the account items in these statements. In order to eliminate the effect of inflation on the balance sheet and income statement, which are the basic financial statements prepared by the enterprises, some adjustments have been made by classifying the account items in these statements. With the adjustments made, the data in the financial statements prepared according to inflation accounting will provide more accurate and reliable data about the enterprise. The application of inflation accounting in Turkey depends on the conditions specified in the Tax Procedure Law. Accordingly, in order to apply inflation accounting; the current year D-PPI (Domestic Producer Price Index) must exceed 10%. In addition, the total PPI in the last three accounting periods must exceed 100%. In this study, the concept of inflation and types of inflation are examined in general, the effects of inflation accounting on financial statements and inflation accounting methods are mentioned, and the regulations in Turkish Accounting Standards and tax legislation are discussed and evaluated in order to eliminate the possible effects of inflation on financial statements.

How to cite this book

Özden, H. & Ökdem, A. (2024). Inflation Accounting and the Effect of Inflation on Financial Statements. In: Yücel, R. & Ayyıldız, Y. (eds.), Accounting in the Digital Age: Studies on Digitalization, Inflation, and Sustainability. Özgür Publications. DOI: https://doi.org/10.58830/ozgur.pub597.c2515

License

Published

December 23, 2024

DOI