About

Income Statement

A Foreigner’s Guide to the Turkish Income Statement
While the Balance Sheet shows the "snapshot" of a specific day, the Income Statement shows the "video" of performance over a period. In Turkey, the Income Statement is strictly defined by the Uniform Chart of Accounts (TDHP) using the "600 series" codes.

1. The Structure: The "Ladder" Format
Turkish Income Statements follow a vertical, multi-step format. It starts with Gross Sales and subtracts deductions step-by-step to reach Net Income.
Here is the standard flow you will see in every Turkish company:

1. Gross Sales (Brüt Satışlar)
2. (-) Sales Deductions: Returns and discounts.
3. = Net Sales (Net Satışlar)
4. (-) Cost of Sales (Satışların Maliyeti - SMM): Direct costs (COGS).
5. = GROSS PROFIT (BRÜT KAR) $\rightarrow$ First major KPI.
6. (-) Operating Expenses: Marketing, Admin, R&D.
7. = OPERATING PROFIT (FAALİYET KARI) $\rightarrow$ Core business performance.
8. (+/-) Other Income/Expense: Non-core activities.
9. (-) Financing Expenses: Interest and FX losses related to loans.
10. = PROFIT BEFORE TAX (VERGİ ÖNCESİ KAR)
11. (-) Tax: Corporate Tax.
12. = NET INCOME (DÖNEM NET KARI)

2. "Pill Info" (Key Insights) for Foreigners
a. The "Nominal Growth" Illusion
In a high-inflation environment (like Turkey recently), a company might show a 50% increase in Revenue.

• The Trap: If inflation is 60%, the company actually shrank in real terms.
• The Fix: Always ask for "Unit Sales Growth" (volume growth) or look at the financials in USD terms to understand real performance.

b. The "Other Operations" Bucket (Diğer Faaliyetlerden Gelir/Giderler)
This is a unique quirk of Turkish accounting.

• What is it? It sits right below "Operating Profit." It includes FX gains/losses related to trade (not loans) and rediscount interest.
• Why it matters: Sometimes, the Operating Profit looks low, but the company is actually profitable because they made huge FX gains from trade receivables, which are hidden in this "Other" line.

c. EBITDA does NOT exist (Officially)
You will not find a line item called "EBITDA" on a standard Turkish statutory Income Statement.

• The Reality: Turkish accountants focus on "Tax Profit." EBITDA is a managerial/investor metric. You have to calculate it manually (see Tips below).

3. Tips for Easier Analysis
Tip 1: Calculating Turkish EBITDA (FAVÖK)
Since it's not on the page, use this formula for a quick proxy:
$$EBITDA = Operating Profit (Faaliyet Karı) + Depreciation \& Amortization (Amortisman)$$
Note: You find the Amortization figure in the Cash Flow Statement or Footnotes, not usually on the face of the Income Statement.
Tip 2: Financing Expenses (The Killer)
In Turkey, interest rates can be high. Look at the line "Finansman Giderleri."

• Analysis: Compare this line to the Operating Profit.
• Red Flag: If Financing Expenses are eating up more than 50% of the Operating Profit, the company is working just to pay the bank. This is very common in Turkey ("zombie companies").

Tip 3: The "KKEG" Factor (Tax nuances)
You might see a term called KKEG (Kanunen Kabul Edilmeyen Giderler) in internal reports.

• Meaning: "Non-Deductible Expenses." These are expenses the company paid (like certain fines, undocumented expenses, or car rentals above a cap) but the government refuses to deduct from taxes.
• Insight: A high KKEG means poor internal discipline or tax planning.

4. Mini Dictionary (TR - EN)

Summary: How to Read It Like a Pro

1. Check the "Gross Margin" (Brüt Kar Marjı) first. In an inflationary environment, if the company cannot pass costs to customers, this margin collapses immediately.
2. Separate Trade FX from Loan FX. Trade FX is operational (good/neutral); Loan FX is financial (bad/costly).
3. Look for "Export Ratio" (İhracat Oranı). Look at the breakdown of sales (Domestic vs. Foreign). A company with high exports is naturally hedged against Turkish Lira devaluation.

Income Statement