On 1 January 2016 a new Accountancy Act shall enter into force as it shall introduce numerous amendments and supplements to the existing regulations concerning financial statements, independent financial audit of Bulgarian companies, announcement of annual financial statements and regulatory periods for storing of accounting information
1. Categories of enterprises
The new law introduces several categories of enterprises. Falling within certain category is defined by the value of respective indicators as at 31 December of the current financial period. The category of the enterprise determines the contents of its annual financial statements, the obligation to undergo financial audit, the obligation to prepare annual activity report, as well as the obligation to announce the financial statements. The categories are the following:
a) Micro enterprises – enterprises, which do not exceed at least two of the following three indicators as at 31 December of the current financial period: a) book value of the assets – BGN 700 000; b) net incomes from sales – BGN 1 400 000; and c) average number of personnel – 10.
b) Small enterprises – enterprises, which do not exceed at least two of the following three indicators as at 31 December of the current financial period: a) book value of the assets – BGN 8 000 000; b) net incomes from sales – BGN 16 000 000; and c) average number of personnel – 50.
c) Medium enterprises– enterprises which are not small and which do not exceed at least two of the following indicators as at 31 December of the current financial period: a) book value of the assets – BGN 38 000 000; b) net incomes from sales – BGN 76 000 000; and c) average number of personnel – 250.
d) Large enterprises – enterprises, which exceed at least two of the following indicators as at 31 December of the current financial period: a) book value of assets – BGN 38 000 000; b) net incomes from sales – BGN 76 000 000; and c) average number of personnel – 250.
In case an enterprise ceases to correspond to the required two out of three indicators for the respective category for the last two financial periods, the company shall change its category as at the beginning of the next (third) financial period. If over two consecutive financial periods an enterprise corresponds to indicators of two different categories, it shall be classified in the category corresponding to the indicators for the last financial period.
2. Groups of enterprises
The preparation of consolidated financial statements depends on the category, to which a group of enterprises belongs. The group category also determines the contents of the annual financial statements, the obligation for performance of independent financial audit and the preparation of consolidated activity report. The group categories are the following:
a) Small groups – groups of enterprises which overall sum of indicators according to their annual financial statements on consolidated basis, as at 31 December of the current financial period does not exceed the thresholds of the following three indicators: a) book value of the assets – BGN 8 000 000; b) net incomes from sales – BGN 16 000 000; c) average number of personnel – 50.
b) Medium groups – groups of enterprises, which are not small groups, and which overall sum of indicators according to their annual financial statements on consolidated basis, as at 31 December of the current financial period does not exceed the thresholds of the following three indicators: a) book value of the assets – BGN 38000 000; b) net incomes from sales – BGN 76 000 000; c) average number of personnel – 2
c) Large groups – groups of enterprises, which overall sum of indicators according to their annual financial statements on consolidated basis as at 31 December of the current financial period exceeds the thresholds of the following three indicators: a) book value of the assets – BGN 38000 000; b) net incomes from sales – BGN 76 000 000; c) average number of personnel – 2
3. Requirements to the Annual Financial Statements (AFS) and the Consolidated Financial Statements
The requirements for the minimal contents of the AFS depend on the category of the company, respectively of the group as described in points 1 and 2 above.
Effective from 01.01.2016 the minimal contents of the AFS shall include balance sheet, profit and loss account and attachment. The form, structure and contents of the full set of the annual financial statements shall depend on the applicable accounting standards, whereas each enterprise may prepare and announce the full set of documents (not only the minimum contents) upon its own discretion.
The AFS of the sole proprietors, whose incomes from sales do not exceed BGN 200 000 for the current financial period and who are not subject to mandatory independent financial audit, may comprise only profit and loss account.
The AFS of micro-enterprises may include only a short-form balance sheet and a short-form profit and loss account, except for investment companies and financial holding companies.
The AFS of the small enterprises may include a short-form balance sheet, short-form profit and loss account and attachments.
The AFS of the medium and large enterprises as well as the public interest entities shall comprise of the full set according to the applicable accounting standards.
The new Accountancy Act introduces a definition of “public interest entity”. These are any the following entities: entities which issue transferable securities admitted to the trading on a regulated market in a EU member state, credit institutions, insurance and reinsurance companies, pension insurance companies and their funds, investment intermediaries representing large companies, collective investment schemes and managing companies representing large companies, financial institutions representing large companies, Holding BDZ EAD and its subsidiaries, National Company Railway Infrastructure, companies which main activity includes production and/or transfer, and/or sale of electricity and/or heating representing large companies, commercial companies whose main activity includes import and/ or transfer and/or transit of gas representing large companies, companies providing water supply and sewerage services.
The parent company of a small group is released from the obligation to prepare consolidated financial statements for the group, unless the group contains at least one public interest entity.
The AFS of micro enterprises, small, medium and large enterprises shall be based on the National Accounting Standards. They may choose to prepare their AFS on the basis of the International Accounting Standards, provided that no changes have occurred in the accounting base. The AFS of the public interest entities shall be based on the International Accounting Standards. The AFS of companies in liquidation or in bankruptcy proceedings shall be based on the National Accounting Standards.
4. Financial Audit
The new Accountancy Act introduces new legal requirements for the performance of obligatory independent financial audit, which shall no longer depend on the type of company / legal entity. Subject to obligatory financial audit shall be the annual and consolidated financial statement of the following enterprises:
i Small enterprises, which as at 31 December of the current financial period exceed at least two of the following indicators: a) book value of the assets – BGN 2 000 000, b) net incomes from sales – BGN 4 000 000, c) average number of personnel – 50.
ii Medium and large enterprises;
iii Public interest entities;
iv Medium and large groups and the groups including at least one public interest entity;
v Enterprises for which mandatory audit is imposed by a special law;
vi Joint-stock companies and limited partnerships with share capital regardless of their category, except for such which have not performed any activity within the respective financial period;
vii consolidated financial statements and annual financial statements of the companies included in the consolidation;
viii non-profit legal entities performing public services, exceeding one of the following indicators: a) book value of the assets as at 31 December – BGN 1 000 000, b) net incomes from commercial and non -profit activities for the current year – BGN 2 000 000, c) total sum of financing received during the current year and financing received in previous years but not used as at 31 December of the current financial year – BGN 1 000 000.
ix non-profit legal entities performing public services including intermediation within international adoption proceedings.
5. Deadlines for announcement of the AFS and the annual activity reports
The new law provided unified term for announcement of the AFS, consolidated financial statements and the annual activity reports in the Commercial Register, respectively the Central Register of the Ministry of Justice, an economic edition or the Internet. The deadline is 30 June of the year following the reported year.
Small enterprises which are not subject to obligatory financial audit shall not be obliged to publish their profit and loss accounts as well as their activity reports.
Limited liability companies (OOD), joint-stock companies (AD), and limited partnerships with share capital (KDA), which represent medium or large enterprises or which are public interest entities, shall announce, together with their AFS, information regarding proposals for distribution of profit or covering losses from previous years, as well as the resolutions of the general meeting of shareholders regarding the manner of distribution of the profit or covering of the losses from previous years.
Sole proprietors who are not subject to mandatory audit shall not be required to announce their AFS.
The head of the enterprise shall be in charge for the due preparation and announcement of company’s financial statements, execution of the financial audit and the general compliance with the legal requirements. The law considers as head of the enterprise the person or persons managing solely or collectively the enterprise in their capacity of owners, managing directors or authorized persons, liable for the entire economic activity of the enterprise before its owner or owners, shareholders, the municipality or the state. Breaches of the legal requirements may lead to financial sanctions.