Updated last 26.03.2021

What is the stock-taking process and what is the basis to carry it out?

A stock-taking is the process of checking the values and the natural parameters of the assets (for example inventories – materials, finished goods, etc.) and liabilities of the company using various tools, comparison of the results to the accounting data and detection of potential differences.

The Accountancy Act requires stock-taking of the company’s assets and liabilities to be carried out at least once a year, in order to present them fairly in the financial statements. Companies having net sales revenue of less than BGN 200 000 during the current reporting period are not subject to mandatory stock-taking.

A stock-taking may also be carried out by decision of the company’s general manager, at the request of the court authorities and other authorities when this is provided for by law. A stock-taking order should be issued in order to carry out the stock-taking and it should state the composition (Chair and members) of the commission.

What are the possible deviations detected in the process of a stock-taking?

• Surpluses: the stocks available exceed the stocks as per the accounts. Any surplus should be accounted for at the  fair value of the asset/liability;
• Shortages: the stocks available are less than the stocks as per the accounts. Any shortage should be accounted for at the book value of the asset/liability.

What are the specifics associated with the reporting of the deviations detected during the stock-taking?

• Shortages at the expense of the company: these are usually due to natural waste as a result of natural disasters, theft and other shortages for which no company staff is at fault;

• Shortages by fault of the liable person (LP): an accounting entry is made in order to reflect the liability of the liable person at the amount of the missing asset;
• Shortages due to natural disaster (when the missing assets were insured): the accounting ledger should record the insurance compensations to be received at an amount corresponding to that of the destroyed asset;
• Shortages subject to compensation with surpluses: this scenario is applicable in the cases when there is causal connection between the missing asset and the surplus asset and the accounting entry is made in value measures;
• Surpluses: they are measured at their actual selling price and are included in the company’s assets.

Is it allowed to recognise the expenses related to shortages for tax purposes?

The expenses related to detected shortages of non-current and current assets (including inventories) are not recognised for tax purposes, except when the shortages are due to:

• Force majeure (for example, natural disaster );
• Shortage of goods resulting from trade in outlets where the clients have direct physical access to the offered goods (the threshold of the shortages may be up to 0.25 percent of the net sales revenue of the respective commercial outlet).

Additional information regarding the recognition of expenses related to shortages for tax purposes is available in art. 28 of Corporate Income Tax act (CITA).

 

Is it allowed to recognised expenses related to waste for tax purposes?

Expenses related to waste of inventories are not recognised for tax purposes, except in the cases listed below:

• Force majeure (for example, natural disaster);
• Technological waste or change in the physical – chemical properties;
• Expiry of the “best before” date (in accordance with legislative regulation or company standards).

Additional information regarding the recognition of expenses related to waste for tax purposes is available in art. 28 of CITA.

For more information
	For more information regarding the related legislative framework see the website of the Ministry of Finance .