Preparation of annual financial statements and management reports

This section provides the following information:

  • Types of financial statements;
  • Requirements to the annual financial statements;
  • Key financial indicators in the financial statements;
  • Need to prepare consolidated financial statements;
  • Nature of the annual management report;
  • Need to prepare annual management report;
  • Reporting of companies not carrying out any activities.


What are the types of financial statements that companies have to prepare?

The financial statements are a structured presentation of the financial position and financial performance of a company. The purpose of the financial statements is to provide information on the financial position and performance of a company, which is necessary for a wide circle of users in order to make economic decisions. In accordance with the Accountancy Act the companies should prepare:

  • Annual financial statements as at 31 December of the reporting period;
  • Consolidated financial statements as at 31 December of the reporting period, when the parent is an entity falling within the requirements of Section Three in Part Two of the Commerce Act;
  • Interim financial statements covering period shorter than one reporting period, when this is required by law or by the company’s policy.


What are the main requirements that the annual financial statements have to meet depending on the type of the company?

  • The annual financial statements of all companies should include as a minimum a balance sheet, profit and loss account and notes to the financial statements (a summary of the significant accounting policies and other explanatory notes);
  • The annual financial statements of sole proprietors whose net sales revenue during the current period does not exceed BGN 200 000 and who are not subject to statutory independent financial audit, may only include a profit an loss account;
  • The annual financial statements of micro companies may only include a concise balance sheet and concise profit and loss account, unless the company is an investment or financial holding company;
  • The annual financial statements of small enterprises may include concise balance sheet, concise statement of income and expenses and notes to the financial statements.

Additional information regarding the basis which your company should apply in preparing its financial statements is available in the clarification titled Accounting policies.


Which are the main financial indicators present in the annual financial statements?

Information regarding the following indicators is required in order to prepare the complete set of elements of the financial statements (balance sheet, profit and loss account, statement of changes in equity and cash flow statement):

  • Assets (for example, buildings, inventories, receivables, etc.);
  • Liabilities (for example, bank loans, payables to suppliers, etc.);
  • Equity (for example, subscribed capital, reserves, accumulated profit / loss);
  • Income and expenses (for example, sales revenue, cost of goods / services, operating expenses, etc.);
  • Changes in equity (for example, capital increase, dividend distribution);
  • Cash flows (for example, proceeds from customers, payments to suppliers, repayment of loans, etc.).

Additional information regarding the accounting documents based on which the annual financial statements are prepared is available in the clarification Drawing up of accounting documents, administration of accounting information / systems.


Important to know
Important to know

Frequent practice adopted by small and medium-sized enterprises in the preparation of their annual financial statements is to use as a basis the standard statement forms of the NSI, which are used to file information to this institution. These forms are compliant with the requirements of the National Accounting Standards (NAS) and International Accounting Standards (IAS) and are available on the website of the National statistical institute (NSI).


When is the company required to prepare consolidated financial statements?

The company should prepare consolidated financial statements when:

  • It controls more than half of the shareholders’ (or partners’) voting rights in another company (subsidiary);
  • It has the right to appoint or dismiss more than half of the members of the management / supervisory body of another company;
  • It has the right to direct the financial and operating policies of another company by effect of an agreement.

Consolidated financial statements may not be drawn up by the parent of a small group (in accordance with the “small group” definition in art. 21, para 2 of the Accountancy Act), except in the cases when the group includes at least one public interest company.


For more information
For more information

Additional information regarding the requirements to the content, allowed principles and certification of annual financial statements is available in:

  • Art. 25 and art. 26 of the Accountancy Act;
  • Standard 1 of the National and International Accounting Standards.


Important to know
Important to know

All traders (in the meaning of the Commercial Register) publish their annual financial statements in the Commercial Register by 30 June on the following year, regardless of whether the company carried out any operations during the preceding year or not. Please, have in mind that the deadline for filing the separate accounts with the NSI is 31 March, and the consolidated ones – 15 June. Additional information regarding the filing of annual financial statements with the NSI is available in the clarification Filing of the required statistic information to the NSI.


What is the annual management report?

Generally speaking the annual management report describes the development of the company’s business during the past period and it states the business policies planned for the following year, the expected investments and personnel development, the expenses investment income and development of the company, as well as the future transactions that have significant importance in the company’s operations.


Which companies are required to prepare annual management reports and which - not?

  • Annual management reports should be prepared by all companies subject to independent financial audit, as well as investment and financial holding companies, regardless of their size;
  • Micro and small enterprises, not subject to independent financial audit, may choose not to prepare management reports;
  • Micro, small and medium-sized enterprises, which are required to prepare management reports, are allowed not include non-financial information therein (for example, clarifications of the company’s business policy, situation at the market, etc.);
  • Consolidated management reports should be prepared by all parent companies that meet the criteria for obligatory presentation of consolidated financial statements under art. 31 of the Accountancy Act.

The annual  and consolidated financial statements of the entities listed below are subject to statutory independent financial audit by registered auditors:

  • Small companies which as at 31 December of the current reporting period exceed at least two of the indicators listed below:

- Carrying amount of the assets – BGN 2 000 000;

- Net sales revenue – BGN 4 000 000;

- Average personnel headcount during the reporting period – 50   employees;

  • Medium-sized and big enterprises;
  • Public interest companies;
  • Medium-sized and big groups and groups that have at least one public interest company;
  • Companies which are required to be subject to statutory independent financial audit.


For more information
For more information

Additional information regarding the contents of the annual management report is available in art. 39 of the Accountancy Act.


What is the reporting procedure for companies that had no operations during the reporting period?

In accordance with the Accountancy Act companies that had no activities during the period have the following obligations:

  • Preparation and filing of declaration of companies with no operations (Declaration of no operations): to be filed with the NSI by 30 April and may be downloaded from the website of the NSI;
  • Filing of declaration  of no operations with the Commercial Register (under art. 38, para 9 of the Accountancy Act: the declaration in free narrative and is filed with the Commercial Register by 31 March.
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