Understanding Bulgarian Accounting Standards: A Guide for Foreign Investors

For foreign investors setting up a business in Bulgaria, understanding the local accounting framework is essential. While the country aligns closely with European Union regulations, there are specific national rules that apply to different types of companies. This guide explains the key elements of Bulgarian accounting standards, helping you stay compliant and make informed decisions.

The legal framework

Accounting in Bulgaria is primarily governed by the Accountancy Act, which transposes EU directives into national law. The act sets out which entities must apply International Financial Reporting Standards (IFRS) as adopted by the EU, and which may use the National Financial Reporting Standards for Small and Medium-sized Enterprises (NFRS for SMEs).

Public interest entities, such as listed companies, banks, insurance companies, and other financial institutions, are required to prepare their financial statements in accordance with IFRS. Other companies, including most small and medium-sized enterprises, can choose between IFRS and NFRS for SMEs. The choice often depends on the company’s size, ownership structure, and future plans, such as seeking external financing or listing.

Financial reporting requirements

All Bulgarian companies must prepare annual financial statements, which include a balance sheet, income statement, cash flow statement (where applicable), statement of changes in equity, and explanatory notes. The financial year is typically the calendar year, though a different fiscal year can be adopted with approval.

Annual financial statements must be submitted to the Commercial Register, which is part of the Registry Agency, by 30 June of the following year. For companies that are subject to independent financial audit, the auditor’s report must be filed together with the financial statements. Late submission can result in penalties.

In addition to annual reporting, certain companies may have interim reporting obligations, especially if they are listed or regulated. However, for most SMEs, only annual reporting is required.

Audit requirements

Not all Bulgarian companies are required to have their financial statements audited. The obligation depends on the company’s size, measured by total assets, net turnover, and average number of employees. The Accountancy Act sets thresholds that are updated periodically to reflect economic changes. In general, larger companies—those exceeding two of the three size criteria—must appoint a registered auditor. Small and micro-enterprises are usually exempt, unless they fall into a specific category such as public interest entities or companies that are part of a group required to prepare consolidated statements.

Audits must be conducted by registered auditors who are members of the Institute of Certified Public Accountants in Bulgaria. The auditor’s report must be prepared in accordance with international auditing standards and be submitted to the Commercial Register along with the financial statements.

Language and currency

Official accounting records and financial statements must be kept in Bulgarian and denominated in Bulgarian lev (BGN). However, companies that apply IFRS may prepare additional financial statements in English or other languages for the convenience of foreign stakeholders. The lev is pegged to the euro at a fixed rate, which provides stability for international investors.

Why it matters

Understanding Bulgarian accounting standards is not just about compliance; it also affects how you manage your business, report to investors, and plan for growth. Choosing the right reporting framework—IFRS or NFRS for SMEs—can have significant implications for your administrative burden and transparency. Seeking advice from a local accountant or auditor familiar with Bulgarian regulations is highly recommended, especially for foreign investors who may be less familiar with the specifics of the system.