Accountancy Act

(Extract)

Article 1

(1) This Act shall regulate:

1. The requirements for exhaustiveness and truthfulness in accounting systems (accounting offices) with enterprises;

2. The contents, drawing up and publication of financial statements of enterprises;

3. The requirements applicable to persons producing financial statements.

(2) Enterprises shall include: any merchants, in the meaning of the Commercial Law; any legal persons that are not merchants; any budget-funded enterprises and non-corporations, any foreign persons conducting business operations on the territory of this country through a permanent establishment, and trade representative offices.

Article 2

Enterprises shall keep account of their business transactions in a chronological order corresponding to the order in which they occur.

Article 3

(1) Primary accounting documents of enterprises shall be kept in the Bulgarian language, in Arabic digits and in Bulgarian levs (BGN). Accounting documents may also be drawn up in the respective foreign language and in foreign exchange in cases of deals negotiated in foreign exchange with foreign contractors.

(2) Accounting documents received by the enterprise written in a foreign language shall be accompanied by a translation into the Bulgarian language of the contents of any business transactions reflected therein.

Article 4

(1) Accountancy shall be executed, and financial statements shall be produced, in compliance with the requirements of this Act while observing the following general principles of accounting:

1. Accrual basis: income and expenses resulting from deals and events are to be accounted for as of such time when they arise regardless of the time of receipt or payment of cash or its equivalent and are to be shown in the financial statements for the period to which they relate;

2. Going concern: it is assumed that the enterprise is a going concern and will remain one in the foreseeable future; the enterprise does not have either the intention or the need to liquidate or significantly reduce the size of its operation; if not, a liquidation or other such accounting basis shall be applied in producing its financial statements.

3. Prudence: evaluation and consideration of risk assumptions and estimated potential loss in the accounting treatment of business transactions to ensure that an actual financial result is obtained;

4. Matching income and expenses: any expenses incurred in relation to a given deal or operation should be reflected in the financial result for the period in which the enterprise draws benefit from those expenses, while income should be recorded for the period in which any expenses attached to generating such income have been recorded;

5. Priority of content over form: deals and events are to be accounted for in accordance with their economic content, essence and financial reality, and not formally, as per their legal (contractual) form;

6. Retention, where possible, of the accounting policy from the preceding reporting period: ensuring comparability of accounting data and ratios across different reporting periods.

7. Independence of the individual reporting periods and the value link between starting balance and closing balance: each reporting period should be treated, in accounting terms, in and of itself, independent of its objective relation to the previous and to the following reporting period, while data in the financial statements at the beginning of the current reporting period must match the data at the end of the previous reporting period.

(3) Enterprises shall keep their accounts on the basis of documentary justification of business transactions and facts while observing the requirements for drawing up documents as provided by the respective effective legislation.

Article 5

(1) On-going accounting operations shall be set up following the procedure specified in this Act and following an individual chart of accounts endorsed by the enterprise’s management.

Accounting documents and form of accounting

Article 6

(1) An accounting document shall be any paper or technical carrier of accounting information and shall be classified as primary, secondary and a ledger:

1. A primary document shall carry information about a business transaction recorded for the first time;

2. A secondary document shall carry processed (summarised or differentiated) information derived from primary accounting documents;

3. Ledgers shall carry chronologically systematised information about business transactions derived from primary and/or secondary accounting documents.

(2) The accounting document may be an electronic document provided the requirements of this Act and those of the Electronic Document and Electronic Signature Act have been met.

Article 7

(1) A primary accounting document addressed to another enterprise or an individual shall contain, as a minimum, the following information:

1. name and number made up of Arabic numerals only;

2. date of issue;

3. name, address and identification number under Article 84 of the Tax and Social Insurance Procedure Code for the issuer and recipient;

4. subject and value expression of the business transaction;

5. first and last name and signature of the individual drawing up the document.

Article 8

In drawing up the primary accounting documents by technical means, the signatures referred to under Article 7, may be substituted for by identification codes or by electronic signatures in the meaning of the Electronic Document and Electronic Signature Act . Identification codes must provide a possibility beyond any doubt to identify the individual drawing up the primary accounting document.

Article 9

(1) In setting up and maintaining its accounting system, an enterprise shall ensure:

1. Exhaustive chronological registration of accounting transactions;

2. Systematic accounting ledgers to summarise accounting information, with the former being opened at the beginning of the reporting period and closed at its end;

3. Synthetic and analytical accounting ledgers, and the reconciliation and connection among them;

4. Interim and annual closing of accounting ledgers, generation of a journal;

5. Possibility to make changes in the book entries made, by way of making adjustment accounting entries;

6. Application of an individual chart of accounts.

(2) Where an accounting software is used in keeping accounts, such software must have been developed in compliance with the requirements of this Act and support data processed by means of it and documents generated by it in the Bulgarian language.

Article 11

The persons who have drawn up and signed the accounting documents and technical information carriers shall be held liable for the authenticity of the information therein.

Assets, owner’s equity, liabilities, income and expenses

Article 13

(1) Assets, owner’s equity, liabilities, income and expenses shall be valued and recorded at the time of their acquisition or origination at their historic cost or other cost, in compliance with the applicable accounting standards.

(2) Historic cost is the acquisition price, the cost or the fair value.

(3) Subsequent valuations of assets and liabilities shall be done in accordance with the applicable accounting standards.

Article 14

Assets and liabilities shall be classified and shown in financial statements under the terms and following the procedures as set in the applicable accounting standards.

Article 15

(1) Enterprises shall depreciate/amortise their depreciable/amortisable long-term/non-current assets in accordance with the applicable accounting standards.

Article 22

(1) Inventory taking of assets and liabilities shall be carried out in each reporting period in order to ensure that they are presented in a truthful manner in the annual financial statements. Inventory shall be taken following a procedure and in a manner as established by the governing bodies of the enterprise.

Article 22b

(1) Annual financial statements shall be prepared and presented on the basis of the National Financial Reporting Standards for Small and Medium- sized Enterprises by enterprises which, for at least one of the two preceding years, do not exceed the indicators under two of the following criteria:

1. balance sheet assets as of 31 December: BGN 8 million;

2. net income from sales for the year: BGN 15 million;

3. average number of personnel for the year: 250 persons;

(2) Newly established enterprises shall prepare and present their annual financial statements on the basis of the National Financial Reporting Standards for Small and Medium-sized Enterprises for the year of their establishment and for the year following it.

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