Chapter three
EVALUATION OF ASSETS AND LIABILITIES

(1)

The evaluation of assets and liabilities at the time of their acquisition shall be done at their historic cost. This cost is: their acquisition price, cost or fair price;

(2)

For assets acquired through notary procedures, the acquisition price shall be the price quoted in the deed.

(3)

The price of acquisition shall comprise the purchase price and the expenditures made to make the asset ready for use;

(4)

Cost shall comprise the production expenses;

(5)

A fair price shall be the amount for which an asset can be exchanged or a liability redeemed in an arms-length transaction between informed and willing buyers and sellers. It shall be deemed a sale price, an exchange price or market price.

(6)

 ⁹ Assets and liabilities may also be valuated at their current price in cases and under terms set in the National Accounting Standards.

(1)

Assets shall be long-term and short-term.

(2)

 ¹⁰ Long-term assets shall be deemed:

1. tangible - land, forests, perennials, buildings, machinery, plant and equipment, production and labour livestock, transportation vehicles, agricultural tools and others;
2. ¹¹intangible - starting and extension costs, research and development products, software, improvement costs (modernisation and rehabilitation) for leased assets, patents, topologies of integrated circuits, marks, industrial designs and other transferable legal rights, license rights, concession rights, know-how, and others; these shall be shown in the balance sheet where future benefit for the enterprise can be proved and when they meet other requirements as set in the National Accounting Standards;
3. financial:
   1. long-term investments - shares, stocks, government securities, bonds and other financial assets held in an investment portfolio with a holding period more than 12 months, and investment properties;
   2. long-term claims - demandable in more than 12 months;
4. goodwill.

(3)

 ¹² Short-term assets shall be deemed:

1. Inventory stock - materials, produce, goods, packaging, growing animals, fattening livestock and work in progress;
2. Receivables - demandable in up to 12 months;
3. Short-term investments - shares, government securities, bonds and other securities in an trading portfolio, which are easily sellable, are held for trading purposes and are acquired for the purpose of being resold within 12 months, bullion and precious stones, except any long-term investments acquired with them;
4. Cash - in hand and in bank accounts.

(4)

 ¹³ The Council of Ministers shall establish the order and procedure for accounting long-term tangible assets and inventory stock of the Ministry of Internal Affairs and the National Investigation Service.

(1)

The enterprises shall depreciate their tangible and intangible long-term assets.

(2)

Depreciation shall not be charged on land, forests, cultural monuments and works of art, nor on fully depreciated / amortised tangible and intangible long-term assets.

(3)

The enterprise shall establish a depreciation schedule for all tangible and intangible long-term assets on the basis of depreciation rates, set by the enterprise. The rate shall depend on their accepted useful life and the depreciation amount.

(4)

The annual depreciation amount shall be established by the management of the enterprise, which shall systematically apply the straight line or the non-straight line method.

(5)

Depreciation shall be charged starting from the month following the month of acquisition of a long-term asset or of its introduction into operation.

(6)

Depreciation in state budget funded enterprises shall be done according to a Decision of the Council of Ministers.

(1)

 ¹⁴

(2)

In the course of its use, inventory stock shall be valuated under one of the following methods:

1. first in, first out price (cost);
2. last in, first out price (cost);
3. ¹⁵ weighted average price (cost);
4. specific price (cost) by delivered lots.

(3)

The production in the enterprises shall be valuated on a continuous basis at its cost, formed on the basis of production costs.

(4)

Work in process shall be determined through taking inventory and shall be valuated on the basis of the actual expenses incurred forming the cost of the output.

The inventory stock present at year-end shall be valuated and shown in the balance sheet at its fair price only in case it is lower than the one at which it has been carried till then. The difference shall be shown as other expenses.

Art. 23.

(1)

 ¹⁷ Expenditures shall be reported in three main groups: expenses by economic elements (for materials, hired services, depreciation allowances, salaries and other personnel remuneration, benefits and social security contributions, and other expenses; financial expenses; and extraordinary expense.

(2)

 ¹⁸ Also shown as expenses shall be the provisions carried against risk assets of:

1. banks, in compliance with the Law on Banks, the Law on Bulgarian National Bank, and other special laws;
2. remaining enterprises, in compliance with the national Accounting Standards.

(3)

 ¹⁹ Interest charged on loan borrowings shall be shown as an operating financial expense.

(1)

Cash, receivables and payables denominated in foreign exchange shall be revaluated at the central rate of the Bulgarian National Bank as follows:

1. at banks, every banking day;
2. at the other enterprises, at the end of each month.

(2)

Differences from revaluations under par. 1 shall be shown as an operating financial expense or an operating financial income.

(1)

At year-end, long-term investments shall be valuated at their fair price.

(2)

Any increase in the balance value of long-term investments under par. 1 shall be shown as a revaluation reserve. Any subsequent decrease in this value from revaluations shall be at the expense of this reserve. If it is larger than the reserve set up for the respective investment, the decrease shall be shown as an operating financial expense.

(3)

The remaining balance from the revaluation reserve of a written-off long-term investment shall be shown as an operating financial income.

(4)

When, as a result of the revaluation, the balance value of long-term investments is reduced, and there have been no earlier increases thereto, the decrease shall be shown as an operating financial expense.

(5)

Any subsequent increase in the value of long-term investments up to the amount of expenses shown under par. 4 shall be shown as an operating financial income. Where the initial decrease has been shown as an expense which has subsequently been compensated by an income up to its full amount, any subsequent increase shall be shown as a revaluation reserve.

(6)

Any differences from the disposition and revaluation of long-term investments of investment companies shall be shown as reserves. Any decrease in the value of long-term investments shall be at the expense of the reserve, or, where no reserve is available, or it is insufficient, it shall be shown as an operating financial expense.

(1)

Expenses not directly connected to the financial result of the current period shall be shown as deferred expenses.

(2)

 ²² Deferred expenses shall be shown in the asset side of the balance sheet as short-term assets.

Assets acquired for no consideration shall be valuated at their fair price.

Uncovered loss from previous years and the loss for the current year shall be shown in the balance sheet on the liabilities side as negative values.

(1)

The legal capital of the enterprise shall be set when the enterprise is established.

(2)

Legal capital may be increased through:

1. additional contributions;
2. issue of shares;

transformation of additional capital, undistributed profit and reserves, save for the revaluation reserve, into capital;

1. transformation of liabilities into capital.

(3)

Legal capital may be reduced:

1. when a partner resigns without his share being sold;
2. when covering losses when the reserves are insufficient.

(4)

The owner may increase or reduce the Legal capital.

Enterprises shall set up reserves out of the balance sheet profit, or in another manner as set be the law.

Short-term investments shall be valuated at the end of each month at their stock exchange price, where they are registered at a stock market and are marketable.

Any differences from the application of par. 1 shall be shown as operating financial expenses or as operating financial income.

In the liability part of the balance sheet, the profit for the current period and the undistributed profit from previous years shall be shown.

(1)

Long-term tangible assets, except for land and forests, shall be revaluated at each year-end by a percentage not to exceed the percentage increase in manufacturers' prices as announced by the National Statistics Institute.

(2)

Land and forests shall be valuated at their fair price.

(3)

Revaluation shall affect in equal proportions both the carrying value and the correction of long-term tangible assets.

(4)

Any increase in the balance sheet value of long-term tangible assets shall be shown as a revaluation reserve. Any subsequent decrease in the balance sheet value due to a revaluation shall be at the expense of this reserve. If the decrease is larger than the reserve set up for the respective long-term tangible asset, it shall be shown as other expenses.

(5)

When the respective long-term tangible assets is written off, its revaluation reserve shall be transformed into undistributed profit.

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Nächste Seite: Chapter four INVENTORY TAKING
Aufwärts: Law on Accountancy
Vorherige Seite: Chapter two ACCOUNTANCY DOCUMENTS