An Act amending and supplementing the Accountancy Act was promulgate in the State Gazette No. 72 of 27.08.2024. The Law introduced into our national legislation two European directives:
I. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 on corporate sustainability reporting (CSRD)
1.1 The Act amending and supplementing the Accountancy Act introduced Directive (EU) 2022/2464 into Bulgarian legislation in relation to the amendment of Directive 2013/34/EU (Accounting Directive).
1.2 The Act introduces an obligation to include a clearly identifiable section on sustainability (sustainability report) in the companies’ management report.
1.3 The sustainability report will be prepared by large and small and medium-sized enterprises (excluding micro enterprises) whose transferable securities are admitted to trading on a regulated market in an EU Member State (public-interest undertakings) and by parent enterprises of large groups of companies.
1.4 The companies should report not only on their property and financial performance, but also on the actions and measures taken with regard to sustainability and the efficient use of natural and social resources. The sustainability report should contain non-financial information relating to the impact of the particular enterprise on environmental processes, social rights and governance issues. In this respect, the law introduces an obligation to include a clearly identifiable section on sustainability issues in the sustainability report. These reports are to be carried out in accordance with the European Sustainability Reporting Standards (ESRS).
1.5 ESRS are EU-wide sustainability reporting standards that cover a range of environmental, social and governance (ESG) topics – including climate change, biodiversity, supply chain, human rights, etc. The main objective of the ESRS is to enable companies to present their sustainability performance in a facilitated and logically structured way. Standards are a key part of the CSRD, with 12 published to date and others in preparation.
1.6 This concept is in line with European policy in relation to the so-called European Green Pact or Green Deal.
1.7 The proposed changes in the law aim to ensure that the information reported by companies is relevant, comparable, reliable, compliant with European sustainability reporting standards, produced in a single machine-readable electronic format and accessible to all stakeholders. In view of this, the law provides that the information in the sustainability report is to be disclosed in accordance with the requirements of the European Sustainability Reporting Standards, which are to be adopted by the European Commission by means of delegated acts.
II. Obliged companies
2.1 The new obligations will arise for the 2024 accounting year only for large public-interest enterprises as well as public-interest enterprises that are parent companies in a large group that have more than 500 employees as at 31.12.2024. For all other categories of entities this obligation will arise in stages in the following accounting years until 2028.
2.2 The Act requires that the Sustainability Report shall be published in the Commercial Register and the Register of Non-profit Legal Entities after it has been audited by registered auditors under the Independent Financial Audit Act, resulting in the latter issuing an audit opinion on the report.
III. Commission Delegated Directive (EU) 2023/2775 of 17.10.2023 regarding the amendment of the size indicators for micro, small, medium and large enterprises and for groups (Delegated Directive (EU) 2023/2775).
3.1 The Act amending the Accountancy Act also introduced the provisions of Delegated Directive (EU) 2023/2775 into our national legislation, where the values of financial indicators for categorising enterprises according to their size have been revised and changed. The reason for the change is driven by the significant inflationary developments in 2021 and 2022 and the reported inflation growth in the period 2013-2023.
3.2 In light of these changes, the Act sets new, higher values for the book value of assets and net sales indicators for the size-based categorisation of businesses and groups. These will apply from the 2024 accounting year. The indicators of book value of assets and net sales revenue have been doubled – e.g. the book value of assets of micro-enterprises has been increased from BGN 450,000 to BGN 900,000 and net sales revenue from BGN 900,000 to BGN 1,800,
3.3 Changing the size of the indicators in line with inflation is intended to relieve micro and small enterprises.
3.4 Thus, annual and consolidated financial statements are subject to mandatory independent financial audit by registered auditors of small enterprises which, as at 31 December of the current accounting period, exceed at least two of the following indicators:
a. book value of assets – BGN 4,000,000;
b. net sales revenue – BGN 8,000,
The indicators of the above criteria are increased twice.
IV. Administrative penalty provisions
4.1 The Law also provides for a financial sanction for a person who fails to include a sustainability report in the business report or a consolidated sustainability report in the consolidated business report or fails to comply with the required format, and they shall be liable to a fine of BGN 1,000 to BGN 3,000 where the company shall be liable to a penalty of BGN 2,000 to BGN 15,000.
4.2 There is also a penalty for incomplete or incorrect information in a sustainability report or consolidated sustainability report respectively. In these cases, the responsible person is liable to a fine of BGN 500 to BGN 3,000 and the company is subject to a penalty of BGN 2,000 to BGN 5,000.
4.3 The Act entered into force on 6 July 2024.