Annual Financial Statements and Audit in Bulgaria

In the context of company formation in Bulgaria, the preparation of annual financial statements is one of the fundamental obligations for any business entity. Financial statements represent a structured presentation of a company’s economic and financial position, offering a clear overview of its performance throughout the year. These reports are not only essential from an accounting perspective but also provide stakeholders — including shareholders, investors, and public authorities — with the information they need to make informed economic decisions.

According to the Bulgarian Accountancy Act, all companies are required to prepare annual financial statements as of 31 December of each fiscal year. Depending on the company’s structure and size, some entities must also prepare interim or consolidated statements. These reports must accurately reflect the financial reality of the business, ensuring transparency and compliance with both national and international accounting standards.

Structure and preparation of annual financial statements

Bulgarian companies prepare their annual financial statements following a standard format, which generally includes a balance sheet, an income statement, and explanatory notes describing the accounting policies applied. However, the level of detail required varies depending on the size of the enterprise. Sole proprietors with revenues below BGN 200,000 who are not subject to statutory audit may prepare only an income statement, while microenterprises may submit simplified balance sheets and income statements. Larger companies must include all sections and provide detailed financial disclosures.

The main indicators reflected in these reports include assets, liabilities, revenues, expenses, cash flows, and changes in equity. When analyzed together, these figures allow the company to determine whether it qualifies as a small, medium, or large enterprise and whether it is subject to an independent audit.

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Consolidated reporting and management responsibilities

A company is required to prepare consolidated financial statements when it exercises control over another legal entity, whether through ownership of the majority of voting rights, the ability to appoint or remove most members of the management board, or through contractual rights to direct financial and operational policies. Small groups may be exempt from this obligation unless they include a public interest entity, in which case consolidated reporting becomes mandatory.

In addition to the financial statements, companies subject to audit must also prepare an annual management report, which outlines the business performance over the past year and presents future plans. This report typically includes an overview of financial and non-financial results, investment strategies, employment policies, and sustainability measures. Micro and small companies that are not audited may choose not to prepare this report, while larger entities are required to submit it annually.

Independent financial audits are mandatory for all medium-sized and large enterprises, public interest entities, and for small companies that exceed at least two of the following thresholds: assets above BGN 2,000,000, net sales revenue above BGN 4,000,000, or an average annual staff of more than 50 employees. In such cases, the audit must be conducted by registered auditors to ensure compliance and reliability of financial data.

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Publication requirements and inactive companies

All entities registered under the Commercial Act are required to publish their annual financial statements in the Commercial Register by 30 September of the year following the reporting period. Separate statements must also be submitted to the National Statistical Institute (NSI) by 30 June, while consolidated reports follow the same 30 September deadline. Meeting these deadlines is essential to ensure financial transparency and regulatory compliance.

Companies that have not carried out any business activity during the financial year must declare this circumstance by submitting a declaration of inactivity to the Commercial Register by 30 June of the following year. They are not required to file reports with the NSI, although they may voluntarily submit a declaration confirming the lack of activity. This process simplifies compliance and helps the authorities maintain an updated overview of operational entities in Bulgaria.

The legal framework for accounting and reporting is defined in Articles 25, 26, and 39 of the Accountancy Act, as well as in National Accounting Standard 1, which align Bulgarian reporting principles with international standards. Compliance with these provisions not only ensures legal conformity but also strengthens investor confidence and enhances the company’s credibility in the market.

The accurate preparation and timely publication of annual financial statements and audit reports are crucial aspects of running a compliant and transparent business in Bulgaria. Understanding the distinctions between different reporting types, meeting submission deadlines, and ensuring accuracy in financial information are key to maintaining the company’s integrity and regulatory standing.

Professional accounting support helps businesses avoid errors, streamline compliance, and ensure their financial documentation meets all legal requirements. For expert guidance in accounting, auditing, and financial reporting, contact Accountancy Bulgaria, tax advisor in Bulgaria.