Annual closing

Year-end close is the process of finalizing a company’s financial records at the end of the fiscal year.
It is a critical process for accurately reporting financial information to stakeholders, including investors,
regulators, and tax authorities.

Profit and Loss. This reports shows how your business has performed over a specified period of time.
Balance Sheet. You should run this report up to the last day of your fiscal year.
Trial Balance. You should run the trial balance from the first day of your fiscal year to the last.

As a rule of thumb, 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.

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 equity and cash flow statement
& attachment), the enterprise should be classified as a medium-sized enterprise, a large enterprise & an enterprise
of public interest within the meaning of § 1, item 22 of the Additional Provisions of the Accounting Act.

For this purpose, information on the following indicators is required:

• 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.).

In accordance with the Accountancy Act, the companies should prepare:
• Annual financial statements as on 31 December of the reporting period;
• Consolidated financial statements as on 31 December of the reporting period, when the parent company is an entity falling within
• certain requirements;
• Interim financial statements cover a period shorter than one reporting period, when this is required by law or by the company’s
• policy.

The annual financial statements of all companies should include as a minimum a balance sheet, profit and loss account,
& notes to the financial statements (a summary of the significant accounting policies and other explanatory notes).

The approval of the annual financial statements is performed by the shareholders meeting or the sole owner
of the capital.

Micro, small and medium-sized enterprises are no longer obliged to file with the Commercial Register &
the Register for Non-Profit Legal Entities (the “Commercial Register”) any documents proving the adoption
of their annual financial statements and annual activity reports, such as invitations to convene a general meeting,
minutes of general meetings, etc. Instead, it will suffice to file a sample form declaration in simple written form
by the company’s representative(s) stating that the company is micro, small or medium-sized and that
the annual financial statements & the annual activity report have been duly adopted through a resolution
of the shareholders’ meeting of limited liability companies or the general meeting of joint-stock companies.

There are two options for publishing the annual financial statement – on site at a branch of the Commercial Register
by submitting an application or electronically, for which purpose an electronic signature is required.
No state fee from 01.01.2022.

The persons engaged in this activity are:
Manager;
Person who prepares the annual financial statement – with a notarized power of attorney;
Trusted person (a lawyer) – with a simple power of attorney.

The application with which the annual financial statement has been published should be accompanied by
additional documents regarding the legal status of the enterprise, such as: minutes of the General Meeting
at which the report has been adopted, minutes of the sole owner of a single-member company.

Accountancy Act – Article 37. (1) Subject to statutory independent financial audit by registered auditors
shall be the annual and consolidated financial statements of:
1. small enterprises which at 31 December of the current reporting period exceed at least two
of the following indicators:
a) book value of the assets – BGN 2,000,000;
b) net sales revenue – BGN 4,000,000;
c) average number of employees for the reporting period: 50;
2. medium-sized and large enterprises;
3. public interest enterprises;
4. medium-sized and large groups and groups in which there is at least one public interest enterprises;
5. enterprises for which this requirement is established by law.

We keep to the hormonology of the annual statutory reporting as follows:
1. Annual recalculation of the PIT, deadline set by law 28th February next year
2. Annual FS, Tax return, annual financial result & taxation due DRAFTS for the Client’s review & approval till end of February, next year
3. Annual FS submit to the National Business Statistics, deadline set by law 1st March till 30th June, next year
4. Annual Tax return & tax due, submit to the National Revenue Agency, deadline set by law 1st March till 30th June next year, deadline to pay tax due 30th June next year (5% discount for early declare & pay till 31st March),
5. Dividends are declared every quarter till 15th date following month, dividends’ tax to pay due, end of month following the date of declaration
6. Annual FS are published at the e-Commerce register till 30th June 2024

Consolidated financial statements shall be drawn up by the parent enterprise in accordance with
the rules & requirements of:
1. the National Accounting Standards – for the enterprises that compile and submit annual financial statements
on the basis of the National Accounting Standards;
2. the International Accounting Standards – for the enterprises that compile and submit annual financial
statements on the basis of the International Accounting Standards.
Consolidated financial statements shall be drawn up by the parent enterprise regardless of the location
of the seats office subsidiaries.

The preparation of consolidated financial statements shall not be mandatory for the parent enterprise of
a small group, unless the group has at least one public interest enterprise.
The format, structure and content of the full set of the consolidated financial statements shall be defined
by the applicable accounting standards.

Enterprises shall draw up an annual management report, which shall contain at least the following information:
1. an objective review, giving a true and fair view of the development and results of the operations of the
enterprise and of its position, together with a description of the mam risks facing it;
2. analysis of financial and non-financial key performance indicators relevant to the business, including
information on issues related to environment and employees; when preparing the analysis for the management report references to expenses reported in the annual financial statements and additional explanations thereon may be included therein;
3. the probable future development of the enterprise;
4. activities in the area of research and development;
5. information on the acquisition of own shares as required under Article f 87e of the Commerce Act;

the liabilities, the financial position and the financial result, the following shall be disclosed:
a) the objectives and policies of the enterprise concerning financial risk management, including its hedging
policy for each main type of hedged item to which hedge accounting is applied;
b) the enterprise’s exposure to price, credit and liquidity risks and cash flow risk.

The non-financial declaration shall include:
1. a brief description of the business model of the enterprise – goal, strategy, organizational structure,
infrastructure, products, policies pursued in relation to the primary and ancillary activities of the enterprise and other;
2. a description of the policies adopted and followed by the enterprise in respect of environmental & social
issues, including the activities performed during the reporting period and the results thereof;
3. the objectives, risks and tasks that lie ahead in terms of environmental and social policies, including a description of activities that would have an adverse impact on ecology, employees or other social issues;

If the company fails to publish its annual financial statements, it faces penalties. The Registry Agency provides
information to the National Registry Agency (NRA) for the enterprises that have not published the Annual
Financial Statements. As a result, the NRA initiates an inspection, establish a violation and impose a penalty.

Penalties are imposed simultaneously on the manager and the company and are in the following amounts:
The penalties that may be imposed under the new act are higher compared to the current regime
& vary between BGN 500 and BGN 15,000.

There is significant increase in the penalty charge for late announcement of the financial statements.
The penalty charge may vary between 0.1 and 0.5% of the net sales revenue of the entity for the year.