KGK Announcement on Disclosing Deferred Tax Assets Arising from Investment Incentives in the Notes to the Financial Statements

The "Board Decision on the Disclosure of Deferred Tax Assets Arising under the Investment Incentive System" of the Public Oversight, Accounting and Auditing Standards Authority of the Republic of Türkiye was published in the Official Gazette of 10.06.2023.

Entities benefiting from the investment incentive system recognise deferred tax assets in their financial statements under TAS 12 Income Taxes (TAS 12), as they have tax advantages carried forward to future periods. In return for this deferred tax asset, "Deferred Tax Income" is recognised in the Statement of Profit or Loss and Other Comprehensive Income, and profit for the period is directly affected by this item. In order to present the growing effect of investment incentives on financial statements, and the nature of this effect, in a more understandable and transparent manner, it has been decided that public interest entities (PIEs) benefiting from the Investment Incentive System, and large entities applying Turkish Financial Reporting Standards on a mandatory or voluntary basis, shall disclose the deferred taxes arising from reduced income or corporate tax under these incentives in the notes to their financial statements under the heading "Tax Advantages Obtained under the Investment Incentive System".

Under the Board Decision, the companies concerned must disclose the following additional matters in the notes to their financial statements:

• The portion of the tax advantage arising from investment incentives that corresponds to current period tax.

• The period(s) in which the deferred tax assets arising from investment incentives are expected to be used.

• The portions of the deferred tax assets arising from investment incentives expected to be recovered each year, by period.

• The significant judgements and significant assumptions used in recognising deferred tax assets arising from investment incentives in the financial statements.

• The effects of changes in the key assumptions used in recognising deferred tax assets arising from investment incentives on the recoverability of those deferred tax assets, and an explanation of these effects.

• Sensitivity analyses of the assumptions used for deferred tax assets arising from investment incentives.

These disclosures must be included in the notes to the annual and interim financial statements for reporting periods beginning on or after 1.1.2023.

Related Official Gazette: https://www.resmigazete.gov.tr/eskiler/2023/06/20230610-4.pdf