An audit may be a statutory requirement for your organisation however by applying a professional approach it can also add value to your business. We aim to provide you with practical and helpful business advice through our risk based audit approach and make the necessary recommendations to improve your business functions.
Our approach is not just about performing compliance engagements to meet the requirements of corporate legislation, but encompasses the implementation of a structured and disciplined approach which evaluates and enhances your risk management as well as the governance policies of your organisation.
Continuous professional education provided to our team of accountants promotes the awareness of the changes in accounting reporting requirements and the challenges and requirements which our clients would have to face and comply with in their accounting and reporting responsibilities. Unfortunately, the growing complexity of financial reporting means that few organisations have the internal expertise to enable them prepare fully compliant statutory financial reports.
Our services include both outsourced accounting and back office services. The goal of our professional team will ensure that your accounting requirements are met, enabling you to focus on your core business activities.
Accounting Framework applicable to Maltese Companies
The Accountancy Profession (General Accounting Principles for Small and Medium-Sized Undertakings) Regulations (GAPSME) were introduced by way of Legal Notice 289 of 2015. The amendments to the Accountancy Profession Act came about following the transposition of the EU Accounting Directive into Maltese Law. Following the amendments to the Act, GAPSME has become the default accounting framework to be applied by small and medium-sized companies for financial periods beginning on or after 1 January 2016.
The Accountancy Profession (General Accounting Principles for Small and Medium-Sized Undertakings) Regulations (GAPSME) were introduced by way of Legal Notice 289 of 2015.
GAPSME introduces three size thresholds – small, medium and large companies based on three size criteria. The designation of companies into the different size thresholds imposes different reporting obligations.
Size thresholds for separate financial statements:
Small Medium Large
Balance sheet total (€) <4 mln 4 mln ≤ x ≤ 20 mln >20 mln
Turnover (€) < 8 million 8 mln ≤ x ≤ 40 mln >40 mln
Average no. of employees < 50 50 ≤ x ≤250 >250
In determining the size category of a reporting entity, a company has to refer to the figures as at the balance sheet date and may not exceed any two of the above criteria.
Furthermore, in determining the size criteria under which a reporting entity is to be categorised, one has to refer to two consecutive accounting periods. Hence, a company is required to exceed the size thresholds applicable to small companies for two consecutive years, prior to being treated as a medium-sized company.
The designation of companies into small, medium or large entities has an important impact on the reporting obligation and disclosure requirements. Following the introduction of GAPSME, reporting entities may still elect to apply IFRS, as adopted by the EU. The latter would however require that the Board of Directors resolve to adopt IFRS as adopted by the EU as the companies’ accounting framework.
It is worth noting that small (non-PIE) entities are exempt from the preparation of a directors’ report. Where advantage is taken of this exemption, the same directors signing the financial statements are required to deliver to the Registrar of Companies a declaration whereby they confirm that the company is eligible for such an exemption.
Group financial statements
The following table outlines the size thresholds which are to be applied in determining whether a group of companies falls to be designated as a small, medium-sized or large group:
Small Medium Large
Balance sheet total (€):
<4 mln (Net) 4 mln ≤ x ≤ 20 mln (Net) >20 mln (Net)
<4.8 mln (Gross) 4.8 mln ≤ x ≤ 24 mln (Gross) >24 mln (Gross)
<8 mln (Net) 8 mln ≤ x ≤ 40 mln (Net) >40 mln (Net)
<9.6 mln (Gross) 9.6 mln ≤ x ≤ 48 mln (Gross) >48 mln (Gross)
Average number of employees
<50 50 ≤ x ≤ 250 >250
The determination of the size designation of group of companies is to be based on two consecutive financial periods, similar to the determination applied by reporting entities when preparing separate financial statements.
Following the transposition of the Accounting Directive, the size exemption thresholds, as provided for in Section 173 of the Companies Act, can still be availed of by small group of companies. In addition, the size criteria has also been widened, thus widening its scope for its application.
On the other hand, the exemption under Section 172 (Financial Holding Exemption) of the Companies Act has been repealed and is no longer available to group of companies. Thus, in addition to the size exemption the other available exemption relates to the intermediate parent company exemption as provided for by Article, subject to all conditions being met.
Main features in GAPSME
The main aim of GAPSME is to simplify the reporting obligations for small and medium-sized entities. The main simplifications are being identified below:
– Small companies are no longer required to draw up a statement of changes in equity and cash flow statement;
– Investments in associated undertakings can be carried at cost in the separate financial statements;
– Intangible assets are to be amortised over a definite period of time;
– Goodwill is amortised over a period not exceeding twenty years;
– Companies are not required to disclose the individual ultimate controlling party;
– Less applicability of fair value and respective disclosure requirements;
– Members of a group are exempt from disclosing related party transactions between such members;
– Certain related party transactions are also not required to be disclosed separately.