On 05.03.2024 a public consultation on a draft Law on Amendments and Supplements to the Law on Accounting ("Law on Accounting") was initiated on the Public Consultation Portal of the Council of Ministers. With the proposed amendments Republic of Bulgaria shall comply with its obligation to transpose Directive (EU) 2022/2464 ("Directive") within the deadline - 06.07.2024.
The main objectives pursued by the Directive, respectively by the Law on Accounting, are two: 1) the introduction of a so-called "business sustainability model", which would include both an analysis of the financial performance of companies' activities and an analysis of the socio-economic impact as a result of those activities; and 2) the drive to strengthen the social responsibility of companies in the European Union ("EU") as part of the commitment under the "European Green Deal" to achieve a justified transition to a sustainable economic system.
In this respect, the Law on Accounting proposes to expand the non-financial information reported to date (the so-called "non-financial statement") and to increase the scope of reporting companies. Obliged entities should include a clearly identifiable section on sustainability matters in their business report (the so-called 'sustainability report').
The sustainability report will be prepared by both large companies 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. Parent undertakings of large groups of undertakings, as well as subsidiaries and branches of undertakings regulated under the laws of a third country, will also be obliged to comply with the above, if certain conditions are met. Although not explicitly prescribed, certain obligations will arise also for enterprises (including small and micro) which are outside the scope of the obliged entities, but are part of the supply chain of an obliged entity.
The sustainability report includes information on environmental, social and human rights factors and governance issues that is necessary to understand the impact of the company towards the above-pointed areas. It shall also include the information necessary to understand how these areas affect the development, performance and condition of the enterprise.
Following the preparation of the report on the company’s activity, including the sustainability report, it will be subject to a statutory audit under the Independent Financial Audit Act.
The Law on Accounting envisages explicit liability for the head and members of the management and supervisory bodies of the entity for the preparation and announcement of the annual financial statements, the consolidated financial statements and the annual reports, as well as liability for the registered auditors for the independent financial audit and for expressing assurance on the enterprise’s sustainability.
Another significant change provided for in the Law on Accounting relates to the criteria for determining the category of an undertaking. The changes introduce new thresholds for defining small, medium-sized and large enterprises, the idea being that higher thresholds will reduce costs and ease the administrative burden for micro and small enterprises.
The proposed thresholds are, as follows:
- for micro-enterprises: book value of assets - up to BGN 900 thousand (approx. EUR 450 thousand); net sales - up to BGN 1.8 million (approx. EUR 0.9 million);
- for small enterprises: book value of assets - up to BGN 10 million (approx. EUR 5 million); net sales - up to BGN 20 million (approx. EUR 10 million);
- for medium-sized enterprises: book value of assets - up to BGN 50 million (approx. EUR 25 million); net sales - up to BGN 100 million (approx. EUR 50 million);
- for large enterprises: book value of assets - over BGN 50 million; net sales - over BGN 100 million (approx. EUR 50 million).
The draft bill is to be submitted to the National Assembly after the conclusion of the public consultation on 05.04.2024.
