Accounting for foreign trade transactions:TAS-2 inventories, TAS-21 effects of foreign currency changes and a comparison to the Turkish Tax Law

With goods, services and capital movements exceed national borders, enterprises, which are parties to international trade transactions, have become in need of a common language in the field of accounting and finance in order to provide comprehensible, comparable and fair reporting. For this reason, financial statements need to be reported according to globally known accounting standards in order for individuals reading various financial information to attain the same result. It was declared in 2005 that the companies listed on the stock exchanges in Europe are required to prepare their financial statements in accordance with the International Financial Reporting Standards. Similarly, companies, banks, insurance, reinsurance and pension companies, whose capital market instruments are traded in the stock market, have to implement the Turkish Financial Reporting Standards which are compatible with the International Financial Reporting Standards. The tax payable at the end of the reporting period needs to be calculated based on the taxation laws, but the accounting records thus prepared are not in concert with the standards. Foreign exchange differences arise in favor of or against the enterprise in the event that there is a difference between the transaction date and payment date for foreign trade transactions made in foreign currencies. The principles applied in the accounting of foreign exchange differences will affect the value of the inventories, profit for the period and amount of tax to be paid at the end of the period. Differences in practices and their results constitute the subject for this thesis.