Inflation accounting application in banking sector and evaluation according to international financial reporting standarts (ifrs)-29 (financial reporting in hiperenflationary economies)

Inflation that is named as cost of living can be defined as a high andcontinuous increase in the general level of prices and respectively decreasein purchasing power of money. Inflation causes some economic, social andpolitical problems in society and also has negative effects on especially taxsystem and financial statements of companies.In hyperinflationary economies, financial statements, prepared byclassical accounting methodologies including historical costs, begins to bemisleading and contains unrealistic data, so rearrangement of thesestatements by means of inflation accounting became more necessary andinevitable.Inflation accounting is to remove negative effects of price changes onassets and liabilities, in other words financial statements of companies, whichare based on historical values.Various institutions in our country publish accounting standards withintheir limits of competence. Each institution publishes standards, leading thecompanies in their area of influence, so this causes confusion and multipledependencies of applications in Türkiye.In our country, living in hyperinflation for about 30 years, concept ofinflation accounting unfortunately has been partially started for last 3 or 4years. Banks have been a leading sector in this area, by restating theirfinancial statements since 2001.In Türkiye inflation accounting has not been a long lasting application,because it is put in practice just before the period that the inflation is about tobe taken under control. In fact, hyperinflationary period is ceased in 2005 andinflation accounting is not applied so far.Definition of inflation and its effects on financial statements is given inthe first part of this thesis. In the second part, prevention methods about thenegative effects of inflation on financial statements and inflation accountingsystems are explained. In the third part, examples are given about theinflation accounting applications in banking system (MUY-14) and also theseapplications are compared with the IAS-29.Although, there have been some differences between IAS-29 andMUY-14 standards, this will not lead big inconsistencies in financialstatements. As a result it is possible to say that regulations published byBDDK, SPK and TMSK about the Inflation Accounting standards in Türkiye,are compatible in general with the IAS-29.