New Standards, Amendments and Interpretations to Consider When Preparing Financial Statements as of 31 March 2022

When preparing financial statements in accordance with Turkish Accounting Standards (TAS) or Turkish Financial Reporting Standards (TFRS), changes in standards and interpretations should be disclosed in the notes as follows:

Disclosures on the effects of a new TAS/TFRS on the financial statements: a) the title of the TAS/TFRS,

b) where applicable, that the change in accounting policy has been made in accordance with the relevant transitional provisions,

c) a description of the change in accounting policy,

d) a description of the transitional provisions, if any,

e) the transitional provisions, if any, that might affect future periods,

f) to the extent practicable, the amount of the adjustment for the current period and each prior period presented:

i. for each financial statement line item affected, and

ii. if "TAS 33 Earnings per Share" applies to the company, restated basic and diluted earnings per share amounts.

g) if practicable, the amount of the adjustment relating to periods before those presented, and

h) if retrospective application is impracticable for a particular prior period or periods, the circumstances that led to that condition, and a description of how and from when the change in accounting policy has been applied.

a. New standards, and amendments and interpretations to existing standards, effective as of 31 March 2022:

• Amendments to TFRS 7, TFRS 4 and TFRS 16 – Interest Rate Benchmark Reform Phase 2 (effective from 1 January 2021); these Phase 2 amendments address issues arising from implementing the reforms, including the replacement of a benchmark rate with an alternative. The Phase 2 amendments provide additional temporary relief from applying specific TAS 39 and TFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform.

• Amendments to TFRS 4 Insurance Contracts – deferral of TFRS 9 (effective from 1 January 2021); these amendments defer the effective date of TFRS 17 by 2 years to 1 January 2023. They also defer the fixed expiry date of the temporary exemption in TFRS 4 from applying TFRS 9 Financial Instruments to 1 January 2023.

• Amendments to TFRS 16 "Leases" extending the COVID-19-related rent concessions practical expedient (effective from 1 April 2021); due to the COVID-19 pandemic, lessees have been granted certain rent concessions. In May 2020, the IASB published an amendment to IFRS 16 Leases introducing an optional practical expedient under which lessees need not assess whether COVID-19-related rent concessions are lease modifications. On 31 March 2021, the IASB published a further amendment extending the practical expedient from 30 June 2021 to 30 June 2022. Lessees can elect to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this results in accounting for the concession as a variable lease payment in the period(s) in which the event or condition that triggers the reduced payment occurs.

b. Standards, amendments and interpretations published but not yet effective as of 31 March 2022:

• Narrow-scope amendments to TFRS 3, TAS 16 and TAS 37, and some annual improvements to TFRS 1, TFRS 9, TAS 41 and TFRS 16; effective for annual reporting periods beginning on or after 1 January 2022.

  • Amendments to TFRS 3 "Business Combinations"; this amendment updates a reference in TFRS 3 to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.

  • Amendments to TAS 16 "Property, Plant and Equipment"; these prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, the company will recognise such sales proceeds and the related cost in profit or loss.

  • Amendments to TAS 37 "Provisions, Contingent Liabilities and Contingent Assets"; this amendment specifies which costs a company includes when assessing whether a contract will be loss-making.

The annual improvements make minor amendments to TFRS 1 "First-time Adoption of Turkish Financial Reporting Standards", TFRS 9 "Financial Instruments", TAS 41 "Agriculture" and the illustrative examples accompanying TFRS 16.

• Amendment to TAS 1 "Presentation of Financial Statements" on the classification of liabilities; the effective date has been deferred to annual reporting periods beginning on or after 1 January 2024. These narrow-scope amendments to TAS 1 "Presentation of Financial Statements" clarify that liabilities are classified as current or non-current depending on the rights that exist at the end of the reporting period. Classification is unaffected by events after the reporting date or by the entity's expectations (for example, the receipt of a waiver or a breach of covenant). The amendment also clarifies what TAS 1 means when it refers to the "settlement" of a liability.

• Narrow-scope amendments to TAS 1, Practice Statement 2 and TAS 8, effective for annual reporting periods beginning on or after 1 January 2023. These amendments aim to improve accounting policy disclosures and to help users of financial statements distinguish between changes in accounting estimates and changes in accounting policies.

• Amendment to TAS 12 on deferred tax related to assets and liabilities arising from a single transaction, effective for annual reporting periods beginning on or after 1 January 2023. These amendments require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences.

• TFRS 17 "Insurance Contracts", as amended in December 2021; effective for annual reporting periods beginning on or after 1 January 2023. This standard replaces TFRS 4, which currently permits a wide variety of practices. TFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.