Introduction
The Bulgarian government has introduced significant amendments to the Accounting Act, which came into effect in August 2024. These changes primarily focus on sustainability reporting, financial audit requirements, and the categorization of enterprises, aiming to streamline reporting obligations and enhance transparency. The amendments also bring Bulgaria’s accounting regulations closer to EU standards while reducing the administrative burden for smaller businesses.
Revised Enterprise Categorization
A key update is the adjustment of the criteria used to classify businesses into micro, small, medium-sized, and large enterprises. The new thresholds mean that more companies will qualify for simplified financial reporting, reducing compliance costs. As a result, approximately 3,700 businesses will shift from small to micro-enterprises, while 350 will move from medium to small. This transition will allow these entities to apply more flexible accounting and disclosure rules, creating a more favorable operating environment.
Micro-enterprises are now defined as businesses that do not exceed at least two of the following thresholds: a book value of assets of BGN 900,000, net sales revenue of BGN 1.8 million, or an average workforce of 10 employees. Similarly, small enterprises must not exceed BGN 10 million in assets, BGN 20 million in net sales revenue, or 50 employees. Medium-sized businesses fall within a broader range, and large enterprises are those that surpass at least two of the medium-sized business indicators.
New Independent Financial Audit Requirements
The amendments also introduce stricter rules regarding financial audits. Small enterprises that surpass at least two of the following criteria—BGN 4 million in assets, BGN 8 million in revenue, or an average of 50 employees—will now be subject to mandatory independent audits. Additionally, consolidated financial statements are now included in the audit scope, ensuring more robust financial oversight.
However, an exemption applies to entities within a consolidated group that fall below specific revenue and asset thresholds. If a company contributes less than 0.5% of the group’s net sales revenue or 1% of total consolidated assets, it may be exempt from an independent audit. This exception does not apply to parent companies, which must still comply with full reporting requirements.
Implications for Businesses
These updates represent an important shift in Bulgaria’s financial reporting landscape, making compliance more manageable for smaller businesses while reinforcing audit and transparency requirements for growing enterprises. Companies must assess their classification under the new framework and determine whether additional audit obligations apply.
For tailored guidance on how these changes impact your business, contact us at [email protected].