Examination of construction and repair works according to accounting standards and tax legislation and an application example

The construction industry has a very large economic share both in Turkey and worldwide. It is regarded as a significant locomotive of the economy as it activates many sub-sectors through the business volume it produces. When we look at the growth of the Turkish economy over the past 20 years, construction-based growth makes up a substantial part of it. Construction-related business includes large-scale works proposed as tender offers by public institutions. Companies need resources other than equity for the large-scale construction works they undertake. Investors providing resources and credit agencies need financial information on the companies in which they invest or to which they provide loans. At a basic level, financial information should be fit for purpose and fairly presented. Furthermore, financial information should be comprehensible, verifiable, comparable, fit for need, trustworthy, and timely presented. This is what the International Accounting and Financial Reporting Standards aim to ensure. The legislative aspect of construction-related business conducted in Turkey is set out by the Turkish Income Tax Law. Article 42 of said law stipulates that profits or losses of works exceeding one year must be identified precisely in the year the work is completed and declared. Article 43 of the same law defines the bases upon which common expenses made during construction works may be distributed. Article 44 stipulates that the end date of the construction work is the date of temporary admission or actual end date. The accounting process for construction works must be performed in accordance with the General Communiqué on the Application of the Accounting System. Although construction works are covered under Turkish Financial Reporting Standard 15 "Revenue from Contracts with Customers" within the framework of the Turkish Accounting Standards, the Financial Reporting Standard for Large and Medium-Sized Enterprises (BOBİ FRS) falls under Section 5 "Revenue Standards". This study aims to explain how accounting procedures should be conducted and reported in accordance with the Turkish Tax Procedure Law, the General Communiqué on the Application of the Accounting System, and the Turkish Accounting Standard/Turkish Financial Reporting Standard BOBİ FRS in the case of long-term construction works. Keywords: Construction accounting, Turkish Financial Reporting Standard 15, Turkish Financial Reporting Standard for Large and Medium-Sized Enterprises Section 5