Inflation accounting and the effect of inflation accounting on the bank profits

Inflation negatively affects the accuracy of the information thatfinancial statements of the banks submit to the enterprise management andto the third parties. Financial statements of the bank have to be arranged inaccordance with the truth. In this way, banks can keep their capitals and cankeep their financial structures strong. Banks will be able to strongly resist toeconomical crisis and inflation.Recently, although inflation rate is single-figure in the period of 2001-2004, the banks acting in the inflationist environment have to minimize theirinflation costs considering permanent and high inflation rate in Turkey.In this study, the effect of inflation accounting on the bank profits hasbeen investigated.Firstly, literature study about the inflation and inflation accounting hasbeen carried out. Then, the bank structure and procedures of the bankaccounting in Turkey have been investigated. In the experimental part of thisstudy, taking 20 banks from banking sector, the effects of inflation accountingon the bank profits have been investigated from the financial statements.As a result of this study, it is found that inflation accounting applicationas a matter of banks, negatively affects the bank profits. The reason of this isconsidered that inflation accounting application in the banks causes the losson the net monetary position. Therefore, corrected periodic net profit of thebanks decreased. For this reason, fictive profit is lost.