What Is TFRS, and Which Companies Report Under These Standards?

The short answer to “what is TFRS?”: TFRS (Turkish Financial Reporting Standards, Türkiye Finansal Raporlama Standartları) is the set of accounting standards published by the Public Oversight, Accounting and Auditing Standards Authority (KGK) in full alignment with international standards, which determines how financial statements are prepared and presented. These standards are the official Turkish equivalent of IFRS (UFRS) issued by the IASB (International Accounting Standards Board). Not every company applies TFRS. The requirement is largely limited to public interest entities such as listed companies, banks and insurance companies.

In this article we explain the legal basis of TFRS, its relationship with IFRS, which company should apply which set of standards, and how it runs alongside the tax books. At the end of the article, we have brought together five points that foreign-owned companies in particular should pay attention to.

What is TFRS, and what is its legal basis?

TFRS is a regulation tied to the accounting provisions of the Turkish Commercial Code (TTK). Article 88 of TTK No. 6102 states that individuals and legal entities preparing financial statements must comply with the Turkish Accounting Standards published by KGK. The same article gives the authority to set and publish these standards solely to KGK.

KGK’s standard-setting authority is also based on Decree-Law No. 660. With this authority, the Authority translates IFRS into Turkish and publishes it in the Official Gazette. An international standard does not acquire legal validity in Turkey as TFRS until KGK publishes it.

The terms may seem confusing at first. According to the definition in KGK’s board decision, the TFRS framework covers four types of text: Turkish Accounting Standards (TMS), Turkish Financial Reporting Standards (TFRS), and the interpretations of both. “TMS”, on the other hand, is a broader umbrella; besides TFRS, it also includes standards issued for different business sizes, such as BOBİ FRS. That is why in practice you come across numbered standard names such as “TMS 2 Inventories” or “TFRS 16 Leases”.

KGK also compiles the standards into annual sets. The Authority’s website lists the TFRS sets published since 2011, and the current set appears under the name “TFRS 2026 Set”. The current texts are available on the KGK Turkish Accounting Standards page .

What is IFRS (UFRS), and how does it differ from TFRS?

IFRS (International Financial Reporting Standards, UFRS in Turkish) is the set of accounting standards developed and issued by the IASB. The aim is for investors to be able to read and compare the financial statements of companies in different countries in the same language. According to KGK’s explanation, these standards were issued under the name IAS until 2001 and were renamed IFRS after that date.

According to the Public Oversight Authority, IAS/IFRS had been adopted by 168 countries as of 2024. This widespread use allows a parent company, investor or bank abroad to easily understand the financial statements of a company in Turkey.

So are the answers to “what is IFRS?” and “what is TFRS?” the same? In terms of content, largely yes. KGK publishes TFRS in full alignment with IFRS. The difference lies in legal status and timing:

An example of the timing difference: the IASB issued IFRS 18 “Presentation and Disclosure in Financial Statements” in April 2024. TFRS 18, however, was published in Official Gazette No. 32894 dated 8 May 2025. The standard will apply to reporting periods beginning on or after 1 January 2027 and will replace TMS 1. To follow the Turkish equivalent of a new international standard, you need to check KGK’s announcements.

Scope of TFRS application: which companies are required to apply it?

The scope of TFRS application is determined by KGK’s “Board Decision on the Scope of Application of TMS”. The institutions and companies on the list annexed to this decision must prepare their separate and consolidated financial statements under TFRS.

According to the summary on KGK’s frequently asked questions page, the mandatory scope generally includes the following groups:

• Companies whose capital market instruments are traded on the stock exchange, and institutions subject to the regulation and supervision of the Capital Markets Board, such as brokerage firms, portfolio management companies and investment trusts,
• Banks, and financial leasing, factoring and financing companies supervised by the BDDK (Banking Regulation and Supervision Agency),
• Insurance, reinsurance and pension companies,
• Authorized institutions meeting the criteria listed in the board decision, and certain companies operating in precious metals.

KGK calls this group “public interest entities” (KAYİK). According to the Authority’s explanation, before the 2014 decision, all entities subject to independent audit were required to apply TFRS. As the audit scope expanded, smaller companies would also have had to apply a costly set of standards, so KGK, similar to European Union practice, limited the TFRS requirement to public interest entities.

Companies not on the list may also apply TFRS voluntarily. For a subsidiary whose parent company abroad reports under IFRS, this choice makes it easier to use a single accounting language within the group.

If you are subject to independent audit but not on the list: BOBİ FRS

BOBİ FRS (Financial Reporting Standard for Large and Medium-Sized Enterprises) is the standard followed by companies that are subject to independent audit but do not apply TFRS. According to KGK’s information, the standard was published on 29 July 2017 and entered into force as of 1 January 2018. The board decision on the current version, BOBİ FRS 2021 Version, was published in the Official Gazette dated 30 March 2021.

BOBİ FRS is a simpler and less costly framework to apply than TFRS. A company may choose TFRS instead of BOBİ FRS; however, to prevent frequent switching between the two frameworks, KGK requires companies that voluntarily apply TFRS to have applied TFRS for at least two years before they can return to BOBİ FRS.

If you are not subject to audit: KÜMİ FRS and the legislation in force

KÜMİ FRS (Financial Reporting Standard for Small and Micro Enterprises) is the simplest framework, prepared for merchants not subject to independent audit. According to KGK, the board decision on KÜMİ FRS 2022 Version was published in the Official Gazette dated 16 January 2023 and began to be applied to accounting periods beginning on or after 1 January 2023.

KÜMİ FRS is not mandatory for everyone. As a rule, it applies to financial statements audited under other legislation or requested by a regulatory authority with reference to KGK standards. Other small and micro enterprises may choose the standard voluntarily; those that do not continue to prepare their financial statements under the legislation in force.

Does a company applying TFRS have different tax obligations?

No. The fifth paragraph of Article 64 of the TTK states that merchants must comply with the provisions of tax legislation on bookkeeping and recording time. KGK also states explicitly that the recording and reporting responsibilities under tax legislation of entities preparing financial statements under TMS continue.

Our answer to those asking what TFRS is and how it differs from the tax books follows from this: in practice there are two separate financial views. The statutory books are kept under the Tax Procedure Law (VUK) and the Uniform Chart of Accounts; TFRS statements are obtained through adjustments made on top of these records. According to KGK’s guidance, these adjustment entries must be kept separately from the commercial books, retained and presented when necessary.

On the tax side, the calculation is also separate. Under Article 32 of Corporate Income Tax Law No. 5520, the general corporate income tax rate is 25%, and the tax base is determined according to the rules in the tax laws. Differences between TFRS profit and taxable profit are tracked separately in the TFRS statements as deferred tax. We explained in detail how the tax base is formed in our what is corporate income tax .

What do Turkish Financial Reporting Standards change?

Turkish Financial Reporting Standards change the way a company presents itself. VUK records are designed for the needs of the tax administration; TFRS, by contrast, aims to let investors, lenders and the parent company see the economic reality. The VUK balance sheet and the TFRS balance sheet of the same company may therefore look significantly different.

Areas where differences commonly arise are:

• Leases: Under TFRS 16, the lessee recognizes on its balance sheet a right-of-use asset and a corresponding lease liability for most leases. In VUK records, rent is generally tracked as a period expense.

• Revenue: TFRS 15 regulates, with a five-step model, when and at what amount revenue is recognized in exchange for transferring goods or services to the customer. For long-term contracts, the timing may differ from VUK practice.

• Financial instruments and impairment: TFRS 9 introduces the expected credit loss model for receivables. The tax rules on provisions for doubtful receivables are separate.

• Employee benefits: The severance pay obligation is measured using actuarial methods under TMS 19.

These differences also have consequences for investment decisions. For example, how government grants obtained under investment incentives are to be presented in the financial statements is governed by TMS 20. The TFRS report of a company growing with an incentive certificate presents these grants with a different logic from the tax records.

5 key points for companies

In the questions we receive from our clients, five TFRS-related topics come up again and again:

1. Recheck the scope every year. Whether a company is subject to TFRS, BOBİ FRS or KÜMİ FRS depends on the independent audit scope and its field of activity. Entering the capital markets, applying for a license in the financial sector or falling within the scope of independent audit changes this picture.
2. Find out the parent company’s reporting calendar from the start. In foreign-owned companies, the group often requests IFRS-aligned data for consolidation earlier than the local statutory calendar. Clarifying these dates at the formation stage prevents two teams from working at the same time at year end.
3. Document the adjustment entries. The entries converting from VUK to TFRS are repeated every year. These separately kept entries are necessary for properly preparing the following year’s statements and for being able to provide explanations in a possible tax audit.
4. Monitor effective and early application dates. The text of each standard includes its mandatory application date and any early application permission. Since new standards such as TFRS 18 may change how statements are presented, budget and system preparations should be planned in advance.
5. Think in terms of financing and investors. KGK states that reporting fully aligned with IFRS makes companies more attractive to foreign investors. Even if you are not required to, preparing a TFRS report before a bank loan, partnership negotiations or the sale of a company can speed up the process.

Common misconceptions we see in the field

“We have become subject to independent audit, so now we need to apply TFRS.” This is a common belief, but it has not been true since 2018. Being subject to audit does not on its own create a TFRS requirement; if you are not on the KAYİK list, you generally apply BOBİ FRS.

“If we prepare a TFRS report, we no longer need tax books.” This is also wrong. Tax returns are based on the statutory books, and TFRS statements do not replace this obligation.

“IFRS and TFRS are completely different in content.” They are not; from this perspective, the answer to “what is TFRS?” is simple: TFRS is the Turkish equivalent of IFRS published by KGK. When talking with a foreign auditor or parent company, this makes it easier to see that both sides are referring to the same set of standards.

We cover the steps of the investment process other than reporting in the articles in our investment guide category.

Who prepares TFRS reporting in foreign-owned companies?

According to KGK’s explanation, preparing financial statements in accordance with TMS is the responsibility of the company’s management. The auditor audits these statements but does not prepare them. Therefore, a team inside or outside the company that can handle statutory accounting and TFRS together is needed.

At Akal CPA, for foreign-owned companies we treat the VUK books and the report requested by the parent company not as separate tasks but as two outputs fed from the same data source. As part of our financial reporting services , we prepare the conversion entries, TFRS and BOBİ FRS statements and group reporting packages.

Last updated: 17.10.2026