Bulgarian Accounting Act: New Rules and Obligations

The amendments to the accounting Act, effective retroactively from July 6, 2024, introduces significant new obligations for businesses, including sustainability reporting, raising thresholds for business category classification, and mandatory financial audits for certain companies.

These new provisions affect anyone who has company registration in bulgaria. 

Bulgarian Accounting Act: Sustainability Reporting

One of the main innovations is the requirement for large enterprises, as well as some small and medium-sized enterprises, to include sustainability information in their annual management reports. Sustainability reports must describe the main intangible assets the company possesses, explaining how these resources generate value and affect the company’s operations. This information must be gathered in a separate section of the management report.

The law also replaces the non-financial statement and the consolidated non-financial statement with a new sustainability report. This report must contain both quantitative and qualitative information, detailing how the company or group affects sustainability issues and how these aspects impact its development, results, and financial situation. Sustainability reports will be published in a unified electronic format and will be subject to auditing, thus ensuring the transparency and accuracy of the information disclosed.

The obligation to report on sustainability will be introduced gradually over three years:

• 2024: for large enterprises that are considered of public interest and have more than 500 average employees, also on a consolidated basis;
• 2025: for all large enterprises, also on a consolidated basis;
• 2026: for small and medium-sized enterprises listed on regulated markets or for specific categories of financial institutions.

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Bulgarian Accounting Act: Increase in Thresholds for Business Categories

While maintaining the same business categories (micro, small, medium, and large enterprises), the changes to the law involve an increase in the thresholds for the “book value of assets” and “net sales revenue” indicators. The new criteria, valid as of December 31, 2023, will determine the category of a company or group of companies for 2024.

Here is a summary of the updated business categories:

• Micro enterprises: book value of assets up to 900,000 BGN, net sales revenue up to 1,800,000 BGN, average number of employees up to 10.
• Small enterprises: book value of assets up to 10,000,000 BGN, net sales up to 20,000,000 BGN, average number of employees up to 50.
• Medium enterprises: book value of assets up to 50,000,000 BGN, net sales up to 100,000,000 BGN, average number of employees up to 250.
• Large enterprises: book value of assets over 50,000,000 BGN, net sales over 100,000,000 BGN, average number of employees over 250.

The thresholds for the criteria for the audit of annual and consolidated financial statements have also been modified. Companies whose financial statements exceed at least two of the following criteria as of December 31 of the reference year will be subject to independent audit:

• Book value of assets over 4,000,000 BGN;
• Net sales revenue over 8,000,000 BGN;
• Average number of employees over 50.

The law provides for financial penalties for companies that do not include the sustainability report in their business report or that provide incomplete or incorrect information. This serves to encourage compliance with the new rules and ensure greater transparency of business activities in relation to sustainability.

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Conclusions

The changes introduced to the accounting law aim to promote greater corporate transparency and broader responsibility towards sustainability issues. The new rules, although requiring greater effort in terms of reporting and auditing, represent a step forward towards a more responsible and sustainable economy.

It is important that businesses prepare adequately to meet the new obligations. To achieve this, it may be helpful to consult with a company advisor in Bulgaria such as Accountancy Bulgaria, which supports companies on changes to thresholds and criteria that will affect their classification and reporting duties.