Inflation accounting in terms of tax legislation and an example application

Inflation is the persistent and consistent upward trend in the average prices of goods and services within an economy. Inflation, a phenomenon that has detrimental repercussions in various domains, also adversely impacts financial statements. The adverse consequences gave rise to the emergence of the notion of inflation accounting. Inflation accounting is a technique designed to mitigate the adverse impact of inflation on financial statements. By employing this approach, financial statements are purged of erroneous data and transformed into meaningful representations that accurately depict the true situation. The Revenue Administration has prepared and published circular number 555, which outlines the procedures and principles for financial statements and inflation accounting transactions that will be applicable for the end of the 2023 accounting period and subsequent periods. In this study will implement inflation accounting to the year-end balance sheet of a selected corporation in 2023, following the guidelines outlined in the general communique numbered 555 of the Tax Procedure Law no: 5024. The aim of the study is to draw attention to the importance of the inflation accounting method and to provide guidance for those who want to practice inflation accounting.