How do you convert statutory books to TFRS?
Producing TFRS-compliant statements from books kept under tax law should not be a project rebuilt from scratch every year. Once adjustments are classified and documented, the conversion becomes repeatable, auditable and fast.
In Turkey, company books are kept under the Tax Procedure Law and the uniform chart of accounts. These records are designed to calculate taxable income correctly. TFRS, by contrast, aims to reflect the company’s economic reality. Because the purposes differ, producing TFRS statements from the statutory books requires a conversion.
In practice, the conversion is done not by keeping a separate set of books but through adjusting and reclassification entries made on top of the statutory trial balance.
Steps of the conversion
- Obtain and reconcile the statutory trial balance: the starting point is a closed trial balance with reconciliations completed. A conversion built on a faulty trial balance carries the errors into the TFRS statements.
- Map accounts to TFRS line items: each statutory account is linked to a line in the TFRS statements. Once set up correctly, the mapping is reused every period.
- Reclassification adjustments: entries that move amounts without changing them, for example re-splitting current and non-current items by maturity.
- Measurement adjustments: entries that change amounts. Typical examples are in the table below.
- Deferred tax: deferred tax is calculated on the book–tax differences the adjustments create.
- Prepare the statements and notes: financial statements and notes are produced from the adjusted trial balance.
Typical measurement adjustments
| Area | Common practice in statutory books | What TFRS takes into account |
|---|---|---|
| Severance pay | Expensed when paid | Provision measured with actuarial methods |
| Unused leave | Usually not recognised | Liability for unused leave |
| Doubtful receivables | Allowance subject to conditions in tax law | Expected credit loss approach |
| Long-dated receivables and payables | Nominal value | Discounting / effective interest where needed |
| Property, plant and equipment | Depreciation rates from tax legislation | Depreciation over economic life, impairment testing |
| Leases | Lease payments expensed | Right-of-use asset and lease liability (TFRS 16) |
| Revenue | Invoice-based | When performance obligations are satisfied (TFRS 15) |
Not every company needs every adjustment; which ones matter depends on the business and on materiality.
Making the conversion repeatable
When the conversion is rebuilt every year, three problems appear: lost time, inconsistency and weak auditability. The way to avoid them:
- Fix the account mapping: apart from newly opened accounts, the mapping does not change.
- Catalogue the adjustments: for each type of adjustment, the calculation method, data source and journal template are written down.
- Roll forward prior-period adjustments: the effect of earlier adjustments on opening balances is tracked systematically.
- File the evidence: the basis of each adjustment is kept so that the auditor, and whoever works on the next period, can follow it.
I describe how this approach can be built as software in the TFRS/IFRS Reporting Software.
TFRS or BOBİ FRS?
The scope of the conversion depends on the framework applied. BOBİ FRS takes simpler approaches on some topics, so fewer adjustments may be needed. I cover the differences in TFRS vs BOBİ FRS.
Frequently asked questions
Does the conversion need separate accounting software?
Not necessarily. Small and medium-sized conversions can be done with well-structured spreadsheets. As transaction volumes and the number of adjustments grow, however, a tool that manages mappings and adjustments systematically makes a difference in time and errors.
Does the conversion change the statutory books?
No. TFRS adjustments are not posted to the statutory books; they are kept in a separate reporting layer. The statutory records continue to be kept under tax law.