7 Common Mistakes in Deferred Tax Accounting (2026)

Deferred tax can arise from differences between the carrying amount in the financial statements and the tax base determined under tax law (TMS 12 / IAS 12 §5). The formula looks simple on the surface; yet which difference is temporary, which rate applies, and how much of an asset may be recognised each require separate accounting judgement.

Not every difference produces deferred tax. Permanent differences that will not reverse in the future do not give rise to a deferred tax asset or liability. Skipping that distinction can show assets or liabilities on the balance sheet that do not exist.

A deferred tax asset (DTA) and a deferred tax liability (DTL) cannot be identified correctly by memorising only a “positive / negative” sign. For assets and liabilities, the direction of the temporary difference is measured differently; recognition then depends on additional conditions (§15, §24).

Mistake 1: Confusing temporary and permanent differences

Not every gap between accounting profit and taxable profit is subject to deferred tax. Non-deductible expenses (Turkish abbreviation: KKEG) are added to the tax base; however, if those items will not reverse in the future they are permanent differences and do not produce deferred tax.

A temporary difference reverses in a way that will affect the tax base in future periods (§5). A permanent difference has no such reversal; therefore no DTA or DTL is recognised.

The incorrect practice is to record a DTA for KKEG or similar permanent items. The correct approach is to answer clearly for each item: “Will this difference reverse in the future?”

Mistake 2: Using the same sign formula for assets and liabilities

The direction of a temporary difference depends on whether the item is an asset or a liability. A single “carrying amount − tax base” shortcut does not give the correct result on both sides.

A taxable temporary difference gives rise to a DTL; a deductible temporary difference gives rise to a DTA if recognition conditions are met (§15, §24). For liabilities such as severance pay the tax base may be zero; in that case the potential DTA amount and the recognised amount are not the same thing.

Applying the sign formula the wrong way swaps DTA and DTL and breaks balance-sheet classification.

Mistake 3: Assuming the same tax rate for every entity and period

Under TMS 12 / IAS 12 §47, deferred tax is measured using rates that are expected to apply when the difference reverses and that are enacted or substantively enacted by the reporting date.

The general corporate tax rate and finance-sector rates may differ; rates can also change between periods. Assuming “every company, every year, X%” is inconsistent with the standard.

According to the Revenue Administration’s 2026 corporate tax rate announcement, the general rate is 25%; for banks and listed finance institutions in the announcement, 30% may apply. That 30% rate is not universal for all companies or all years worldwide.

Mistake 4: Recognising a deferred tax asset automatically and in full

The amount calculated on a deductible temporary difference or unused tax loss is a “potential DTA”. A recognised DTA is recognised only to the extent that sufficient taxable profit is probable in the future (§24, §34).

If there have been recent losses, convincing evidence that future profit will be available is required (IAS 12 / TMS 12 §35). Unsupported optimistic projections are not enough for recognition.

For unused tax losses, each loss year is tracked separately with its own statutory offset period. Inventing a single remaining period on cumulative losses mixes the remaining offset windows of different years and misleads.

The unrecognised portion remains “potential not yet taken to the balance sheet”; automatic full recognition is not permitted.

Mistake 5: Discounting deferred tax

TMS 12 / IAS 12 §53 states clearly: deferred tax assets and liabilities are not discounted. Even if the timing of cash flows is known, DTA/DTL are not reduced to present value.

Applying a discount conflicts with the standard’s measurement model and harms comparative presentation.

Mistake 6: Recognising deferred tax in the wrong place

Deferred tax is reported where the underlying transaction is recognised: profit or loss, other comprehensive income (OCI) or directly in equity (§57–58 and especially §61A; for amounts recognised directly in equity, §62A). If the underlying item is in OCI, the related DTA/DTL is also in OCI.

Business combinations have special rules; the initial recognition exception for goodwill must not be confused with differences on identifiable assets and liabilities.

Example for OCI items such as revaluation: difference 1,000,000 TL × 25% → DTL 250,000 TL is recognised in OCI; tax expense is not charged to profit or loss.

In leases and single-transaction / IAS 12 §22A contexts, equal taxable and deductible differences may arise. That guidance does not mean “an automatic exemption always applies in every scenario”; it is assessed case by case.

Mistake 7: Offsetting DTA and DTL unconditionally

The default presentation is gross. TMS 12 / IAS 12 §74 requires a legally enforceable right of offset and the same tax authority and the same taxable entity (or equivalent conditions required by the standard).

Different offset groups cannot be netted. If conditions are met in one group and not in another, the eligible group is presented net and the other remains gross.

Adding all groups’ DTA and DTL into a single line violates §74.

Pillar Two temporary exception

Under IAS 12 / TMS 12 §4A and §88A, a temporary exception may apply to deferred tax accounting related to Pillar Two (global minimum tax). That exception does not extend general DTA/DTL rules to every topic; its scope is limited to the relevant paragraphs of the standard.

TMS 12 and BOBİ FRS Section 23

Entities applying TMS/TFRS follow TMS 12; those applying BOBİ FRS follow BOBİ FRS Section 23. The two frameworks are assessed separately; practice under one is not automatically carried to the other.

A tool does not replace professional judgement

The calculator and this article are for education / control purposes. Temporary-difference classification, rate selection, recognition and offset decisions require entity-specific professional judgement and current law.

Expert review for complex transactions

Business combinations, investments in associates / subsidiaries and multi-entity group structures involve additional standard paragraphs and tax rules; the examples in this article do not replace those files.

A short note on account codes

Codes such as 284, 484, 290, 492, 692 or 693 mentioned in the text are only example journal labels. The uniform chart of accounts varies by entity; TMS 12 does not mandate local account codes. The calculator also does not classify by account code.

Period-end checklist

• •Has each difference been classified as permanent or temporary?
• •Was the correct temporary-difference formula used for assets and liabilities?
• •Is the rate enacted / substantively enacted at the reporting date and appropriate for the reversal period?
• •Were potential DTA and recognised DTA separated, and was §35 evidence documented?
• •Were DTA/DTL not discounted (§53)?
• •Is deferred tax in the same place as the underlying item in P&L / OCI / equity (§57–58)?
• •Was offset applied on a group basis under §74 conditions?
• •Are tax-loss years tracked separately for period and utilisation?

Conclusion

In deferred tax accounting, the costliest mistakes usually come not from formula errors but from skipped judgements on classification, rate, recognition, presentation and offset.

The seven mistakes and checklist above provide a systematic review base at period close; the final amounts are still completed with entity-specific evidence and professional judgement.