Inventory Valuation in Türkiye: A Foreign Operator's Guide to Getting Year-End Right

For any trading or manufacturing subsidiary, inventory is usually one of the largest items on the balance sheet — and one of the easiest to get wrong. In Türkiye, foreign-owned operations face an extra layer: local valuation rules, inflation accounting effects, and the need to reconcile the Turkish statutory inventory figure with what the parent group expects. This guide walks through getting year-end inventory right.

Why inventory valuation matters more than it seems

The value you assign to closing inventory directly drives two critical numbers:

• Cost of Goods Sold (COGS) — higher closing inventory means lower COGS, which means higher reported profit (and higher tax).
• Balance sheet strength — inventory is an asset; misstating it distorts your financial position and any ratios the parent or lenders look at.

Get inventory valuation wrong and both your profit and your balance sheet are wrong simultaneously. For a foreign-owned entity, this also means the parent's consolidated numbers inherit the error.

Accepted costing methods in Türkiye

Turkish tax law accepts several inventory costing methods, and the choice affects your reported result:

Weighted Average Cost — the most common in Türkiye. Each unit is valued at the running average cost of all units. Smooths out price fluctuations, simple to administer.

FIFO (First-In, First-Out) — assumes the oldest stock is sold first. In an inflationary environment (like Türkiye), FIFO tends to show higher closing inventory value and higher profit, because older, cheaper costs flow to COGS while recent, higher costs stay in inventory.

LIFO is generally not permitted under Turkish tax rules (consistent with IFRS, which also prohibits LIFO).

A key point for foreign operators: the method you use locally should be consistent with — or at least reconcilable to — what your group uses. If the parent uses FIFO and the Turkish entity uses weighted average, you need to understand and document the difference.

The inflation-accounting effect on inventory

Inventory is a non-monetary item, so when Türkiye's inflation accounting is in force it is subject to restatement — which can materially change the closing inventory value in statutory accounts versus a simple historical-cost figure. Current status matters here: under Law No. 7571 (Official Gazette, 25 December 2025), inflation adjustment has been suspended for the 2025, 2026 and 2027 financial years for most taxpayers (with a narrow exception for businesses continuously dealing in processed gold and silver).

The practical implication for foreign operators: in years when inflation accounting applies, statutory inventory value and historical-cost value diverge and you must explain the bridge between them; in the currently suspended years (2025–2027), inventory is carried at historical cost under the chosen method, which is closer to what most parent groups expect. Because the rule can be reinstated by legislation, confirm the current-year status with your CPA rather than assuming.

Year-end count and valuation together

Inventory valuation depends on an accurate count. The two go hand in hand:

1. Physical count establishes how much you have (quantity).
2. Valuation establishes what it's worth (quantity × unit cost under your chosen method).

An error in either breaks the result. A perfect count valued with stale unit costs is wrong; a perfect costing method applied to a wrong quantity is wrong. Both must be controlled.

For foreign-owned operations, the count should be documented well enough to satisfy both Turkish tax inspectors and the parent's auditors — two different audiences with overlapping but not identical expectations.

Net realisable value (NRV) check

Both Turkish accounting and IFRS require inventory to be carried at the lower of cost and net realisable value. If the market value of an item has fallen below its cost (obsolescence, damage, price collapse), it must be written down. Skipping this NRV check overstates assets and profit. For slow-moving or seasonal stock, this check is essential at year-end.

The parent-reporting reconciliation

At year-end, a foreign-owned Turkish entity should be able to show:

• Statutory closing inventory (TRY, under the chosen method, with any inflation restatement)
• The same inventory in group reporting currency
• A reconciliation explaining method differences and inflation effects between statutory and group figures
• NRV write-downs applied, with justification

This reconciliation is what lets the parent trust the Turkish inventory number in the consolidation.

How Birasyo helps

Birasyo ERP maintains inventory valuation continuously using your chosen method (weighted average or FIFO), so closing values are always current rather than reconstructed at year-end. Physical count results from mobile barcode scanning feed directly into valuation, NRV write-downs are tracked with justification, and statutory TRY values translate to group currency with a documented reconciliation. The count and the valuation stay connected, which is exactly what year-end requires.

Explore Birasyo inventory for foreign-owned operations →

Summary

Inventory valuation in Türkiye combines two things foreign operators underestimate: the choice of costing method in an inflationary environment, and the reconciliation between statutory and group figures. The count tells you the quantity; the method and inflation rules tell you the value; the NRV check keeps you honest. Control all three throughout the year, and year-end becomes a confirmation rather than a scramble.