IAS 29 Inflation Accounting in Turkey: A CFO Guide for Foreign Subsidiaries

Is Turkey a Hyperinflationary Economy Under IAS 29 in 2026?

For IFRS reporting purposes, Turkey continues to be treated as a hyperinflationary economy in 2026.

IAS 29 does not define hyperinflation through one automatic numerical test. Instead, it identifies economic characteristics that indicate a hyperinflationary environment.

One of the indicators is cumulative inflation over three years approaching or exceeding approximately 100%. Other indicators include the population’s preference for non-monetary assets or relatively stable foreign currencies and the widespread linking of prices, interest rates and wages to price indices.

When Does IAS 29 Apply to a Turkish Subsidiary?

IAS 29 applies to financial statements of an entity whose functional currency is the currency of a hyperinflationary economy.

This means the analysis starts with functional currency.

For a Turkish operating company whose functional currency is TRY, IAS 29 can therefore be directly relevant to IFRS or TFRS reporting.

For a multinational group, the practical reporting chain normally looks like this:

IAS 29 Is Not the Same as Turkish Tax Inflation Accounting

This distinction is critical.

A Turkish subsidiary may simultaneously have:

• a Turkish statutory accounting ledger;
• inflation-related calculations under Turkish tax legislation;
• TFRS or IFRS reporting adjustments;
• IAS 29 inflation restatement; and
• a group consolidation package.

These are not automatically identical calculations.

What Does IAS 29 Actually Do?

IAS 29 addresses the loss of purchasing power that occurs when financial statements are prepared in the currency of a hyperinflationary economy.

Without restatement, amounts generated at different dates are added together even though the purchasing power represented by those amounts may be materially different.

For example, TRY 10 million spent on an asset several years ago and TRY 10 million spent near the current reporting date do not represent the same purchasing power.

IAS 29 therefore requires relevant financial statement amounts to be expressed in terms of the measuring unit current at the reporting date.

Monetary vs Non-Monetary Items Under IAS 29

This is the central accounting distinction.

Why Monetary Items Are Different

Assume a Turkish company holds TRY cash during a period of significant inflation.

The nominal amount remains TRY.

Its purchasing power, however, falls.

The economic effect of that loss is not captured by restating the cash balance upward. Instead, IAS 29 captures the impact through the entity’s gain or loss on the net monetary position.

What Is the IAS 29 Net Monetary Gain or Loss?

The net monetary gain or loss reflects the economic effect of inflation on the company’s monetary asset and liability position.

Conceptually:

• a company holding substantial net monetary assets can lose purchasing power during inflation;
• a company holding substantial net monetary liabilities may experience the opposite economic effect; and
• the resulting IAS 29 monetary effect is recognised in profit or loss.

How Are Property, Plant and Equipment Restated?

Historical-cost non-monetary assets can contain amounts originating from periods with very different purchasing power.

IAS 29 therefore generally requires relevant historical amounts to be restated using changes in an appropriate general price index from the date the amount entered the accounts to the reporting date.

This can affect:

• gross carrying values;
• accumulated depreciation;
• current-period depreciation;
• asset-related expenses;
• equity; and
• deferred tax.

For asset-heavy Turkish subsidiaries, the impact can therefore be substantial.

What Happens to Inventory?

Inventory requires careful analysis because inventory balances may contain costs incurred at different dates.

Where inventory is carried at historical amounts, the inflation restatement process needs to consider when those costs were incurred.

A company with fast inventory turnover will therefore have a different IAS 29 profile from a company carrying long-dated inventory.

For manufacturing groups, this can require coordination between:

• inventory sub-ledgers;
• standard-cost systems;
• production accounting;
• purchasing data;
• ERP transaction dates; and
• group reporting systems.

How Are Revenue and Expenses Restated?

Income statement amounts arise throughout the reporting period.

IAS 29 therefore requires income and expense items to be expressed in the measuring unit current at the reporting date.

In a high-volume business, performing transaction-by-transaction inflation calculations may be operationally difficult.

Companies may therefore design periodic calculation methods — for example monthly data sets — where those methods appropriately reflect the underlying transactions and the requirements of the standard.

What Happens to Comparative Financial Information?

IAS 29 is not limited to current-year balances.

Comparative information is also expressed in terms of the measuring unit current at the end of the reporting period in accordance with the applicable requirements of the standard.

This is particularly important for group controllers reviewing:

• year-on-year revenue growth;
• gross-margin trends;
• EBITDA;
• working capital;
• fixed-asset movements; and
• equity.

Comparing an inflation-adjusted current year with an unadjusted prior year would otherwise distort the analysis.

IAS 29 and IAS 21: Which Comes First?

For many multinational groups, this is the most important practical question.

Consider a Turkish subsidiary with:

• TRY functional currency;
• a European parent;
• EUR presentation currency; and
• IFRS group reporting.

The Turkish entity’s figures generally need to be dealt with under IAS 29 before the relevant IAS 21 foreign-currency translation into the group’s presentation currency.

This sequencing matters.

Simply translating an unadjusted Turkish trial balance into EUR does not solve the IAS 29 issue.

What if the Turkish Company’s Functional Currency Is EUR or USD?

IAS 29 is linked to functional currency, not simply the country of incorporation.

The fact that a legal entity is incorporated in Turkey does not, on its own, determine its functional currency.

Functional currency is determined under IAS 21 based on the currency of the primary economic environment in which the entity operates.

A Turkish subsidiary with a genuinely non-TRY functional currency therefore requires a different IAS 29 analysis from a Turkish entity whose functional currency is TRY.

This subject deserves separate analysis and will be covered in our guide on functional currency for Turkish subsidiaries.

IAS 29 and Deferred Tax

IAS 29 can create significant deferred-tax implications.

Inflation restatement changes the financial-reporting carrying amounts of assets, liabilities and equity components.

The relevant Turkish tax bases may not move in exactly the same way or at exactly the same time.

This can create or change temporary differences under IAS 12.

Particular attention may be required for:

• property, plant and equipment;
• intangible assets;
• inventory;
• equity-related inflation adjustments;
• tax loss positions; and
• other items where financial-reporting and tax carrying amounts diverge.

For this reason, IAS 29 should not be finalised independently of the group’s tax provision and deferred-tax process.

IAS 29 and the Turkish Chart of Accounts

A multinational’s Turkish statutory ledger is often structured around the Turkish chart of accounts, while IAS 29 calculations are required for financial reporting.

The two processes need a controlled bridge.

The starting point should normally be a reconciled trial balance with clear mapping into the group’s reporting structure.

See: Turkish Chart of Accounts vs Group Chart of Accounts: A Guide for Multinational Companies .

IAS 29 Inside SAP, Oracle or NetSuite

IAS 29 is not only an accounting-policy issue. It is also a data issue.

A reliable calculation may require historical information on:

• asset acquisition dates;
• capital increases;
• inventory-cost formation;
• revenue and expense recognition dates;
• equity movements;
• monetary balances;
• tax bases; and
• prior-period inflation adjustments.

If this information exists across several ERP modules or separate local systems, year-end calculations can become unnecessarily manual.

For that reason, multinational companies should consider IAS 29 when designing their Turkish ERP and reporting architecture.

Related guide: ERP Localization in Turkey: SAP, Oracle & NetSuite Guide .

Should IAS 29 Be Calculated Only at Year-End?

For a group with quarterly, monthly or interim IFRS reporting requirements, waiting until year-end can create major reporting volatility and reconciliation problems.

A more controlled operating model is to incorporate IAS 29 into the reporting calendar.

The exact frequency depends on the group’s reporting requirements, but the finance architecture should allow the inflation effect to be identified and reconciled consistently during the year.

IAS 29 for Shared Service Centres

Where a Turkish subsidiary is supported by a regional shared service centre, responsibilities need to be particularly clear.

The SSC may own:

• AP and AR;
• general-ledger posting;
• fixed assets;
• intercompany;
• monthly close; and
• group reporting.

The Turkish statutory or reporting team may nevertheless need to own local inflation-accounting inputs and review.

A practical responsibility matrix can look like this:

Common IAS 29 Problems We See in Multinational Reporting

1. Confusing Tax Inflation Accounting With IAS 29

The two processes may use overlapping source information but should not automatically be treated as interchangeable.

2. Starting From an Unreconciled Trial Balance

Inflating incorrect accounting data simply creates a more sophisticated incorrect result.

The statutory TB should first reconcile to the underlying ledgers and reporting structure.

3. Missing Historical Acquisition Dates

Fixed-asset and equity restatements depend heavily on historical information. Missing dates can turn IAS 29 into a major data-reconstruction project.

4. Treating IAS 29 as a Year-End Journal

IAS 29 affects financial statement presentation, income statement amounts, balance-sheet amounts, equity, monetary gains or losses and potentially deferred tax.

It is broader than a single journal entry.

5. Translating to EUR or USD Before Completing the Inflation Analysis

For a TRY-functional-currency subsidiary, the IAS 29