Legislative Changes Related to Directive 2022/2464
At a meeting of the Council of Ministers held on 03.07.2024, the government approved draft laws amending and supplementing the Accounting Act and the Independent Financial Audit Act. The amendments relate to the obligation to transpose into national law the requirements of Directive 2022/2464 of the European Parliament and the Council of 14.12.2022, amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC, and Directive 2013/34/EU regarding sustainability reporting by undertakings, as well as Commission Delegated Directive (EU) 2023/2775 of 17.10.2023 amending Directive 2013/34/EU concerning the revision of size indicators for micro, small, medium-sized, and large enterprises and groups.Amendments to the Accounting Act
The draft law proposes an expansion of the non-financial information reported to date by introducing a requirement for enterprises to include a clearly distinguishable section on corporate sustainability (a sustainability report) in their management report.The sustainability report will cover topics related to environmental protection, social rights, human rights, and corporate governance.
This change will impact:
- Large enterprises
- Small and medium-sized enterprises (excluding micro-enterprises) whose transferable securities are admitted to trading on a regulated market in an EU member state (public interest entities)
- Parent companies of large corporate groups
- Subsidiaries and branches of companies based in third countries, which, under certain conditions, will also have to publish a sustainability report of the parent company from the third country
The bill also transposes the provisions of Delegated Directive (EU) 2023/2775, which revises the size indicators for micro, small, medium-sized, and large enterprises and groups. The financial thresholds for classifying enterprises and groups based on their size are adjusted to reflect inflation in 2021 and 2022 and the overall inflation growth from 2013 to 2023.
Under Directive 2013/34/EU, enterprises and groups are classified as micro, small, medium, or large based on three indicators:
- Book value of assets
- Net turnover
- Average number of employees
- The preparation, audit, and publication of financial statements
- The disclosure of sustainability-related information
Amendments to the Independent Financial Audit Act
The proposed amendments to the Independent Financial Audit Act aim to enhance the reliability of sustainability reporting and safeguard the public interest by ensuring that the sustainability reports included in management reports comply with applicable legal requirements and sustainability reporting frameworks.The proposal also includes a change in the title of the law, which will now include the phrase "and assurance on sustainability reporting."
Additional rules are introduced for:
- The mandatory audit of annual and consolidated financial statements
- The assurance of annual and consolidated sustainability reporting.
These new legislative changes aim to increase transparency and corporate accountability regarding sustainability matters. They will provide investors, civil society, and social partners with reliable and comparable sustainability information, ultimately improving market confidence and decision-making.
Source: www.gov.bg/bg
Implementation of management standards
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