Topic
Financial Reporting: TFRS, IFRS and BOBİ FRS
Financial reporting is how a company presents its financial position, performance and cash flows to shareholders, lenders and other external stakeholders within a defined standards framework. In Turkey, that framework is set by the Public Oversight, Accounting and Auditing Standards Authority (KGK).
What are TFRS, IFRS and BOBİ FRS?
- IFRS (International Financial Reporting Standards) are issued by the International Accounting Standards Board (IASB) within the IFRS Foundation.
- TFRS (Turkish Financial Reporting Standards) are the standards issued by KGK in line with IFRS, made up of standards numbered TMS and TFRS and their interpretations.
- BOBİ FRS (Financial Reporting Standard for Large and Medium-sized Entities) is a standard issued by KGK that provides a simpler framework than TFRS.
Which entity applies which standard?
In broad terms, public interest entities apply TFRS; entities that are subject to independent audit but not required to apply TFRS apply BOBİ FRS and may opt for TFRS. Because scope is set by KGK decisions and can change over time, the position of a specific entity should be assessed against current regulation.
Why do statutory books differ from reporting standards?
In Turkey, companies keep their books under the Tax Procedure Law and the General Communiqués on the Accounting System, using the Uniform Chart of Accounts. These records largely follow the measurement rules of tax legislation. TFRS and BOBİ FRS aim to reflect economic reality. Differences commonly arise in:
| Area | Common statutory practice | Under reporting standards |
|---|---|---|
| Doubtful receivables | Allowance subject to tax-law conditions | Expected credit loss / impairment assessment |
| Employee termination benefits | Expensed when paid | Measured as a liability |
| Property, plant and equipment | Depreciation at tax-law rates | Depreciation over useful life, impairment testing |
| Leases | Rent expense | As required by the standard, e.g. right-of-use asset and lease liability (TFRS 16) |
| Deferred tax | Generally none | Calculated on temporary differences |
Moving from statutory books to TFRS or BOBİ FRS is therefore not a “format change” but the systematic identification and recording of measurement differences — usually called conversion to reporting standards.
How does financial reporting differ from management reporting?
Financial reporting and management reporting do not answer the same question. The comparison I use to make the distinction clear:
| Financial reporting | Management reporting | |
|---|---|---|
| Reader | Shareholders, lenders, regulators | Management |
| Framework | TFRS / BOBİ FRS | The company’s own definitions |
| Frequency | Annual, interim | Monthly, weekly |
| Focus | Reliability and comparability | Decisions and action |
| Detail | As the standard requires | As the decision requires (unit, product, customer) |
Both reports should be fed by the same data and reconcile to each other. If the difference between profit in the management report and profit in the financial statements cannot be explained, trust in one of them erodes. For management reporting structure, see FP&A.
Why must statements and notes be consistent?
The statements and the notes form one whole: balance sheet lines must agree with the notes, notes with movement schedules, subtotals with totals. I describe the approach I developed for checking these relationships systematically in TFRS/IFRS Reporting Software.
Reading financial statements
Financial statements are the most systematic source of information about a company, but they have limits: the balance sheet is a photograph of one day, many amounts are estimates, and value that cannot be measured does not appear. I discuss these limits in What don’t financial statements tell us?
Frequently asked questions
Are IFRS and TFRS the same?
TFRS are issued in line with IFRS and largely overlap in content. However, the text applicable in Turkey and its effective dates are set by KGK.
Can a company applying BOBİ FRS move to TFRS?
In broad terms, entities applying BOBİ FRS may choose to apply TFRS. The timing and effects of the transition should be planned separately.