General accounting principles for small and medium enterprises (GAPSME).

Accounting principles

General accounting principles for small and medium enterprises (GAPSME).

As one of Malta’s top leading accounting firms, GCS Malta offers a full range of accounting and support services which are necessary for the maintenance of a company’s accounting records. One of our services is to update our clients on the EU Single Accounting Directive 2013/34/EU, which repealed the 4th and 7th Accounting Directives on Individual and Consolidated Accounts, introduced a simplified procedure for financial statement reporting. This Directive was transposed into Maltese law via legal notice 289 of 2015 in virtue of the ministerial powers conferred on the Minister of Finance in virtue of the Accountancy Professions Act (Chap. 281 of the Laws of Malta).

The aim of the Directive is to determine the general accounting principles and to simplify the process in relation to the preparation of statutory financial statements for qualifying micro, small and medium entities. GAPSME is now the default accounting framework for SMEs in relation to financial reporting periods starting on or after 1st January 2016, unless a resolution is passed by the Board of Directors to the effect that IFRSs (or the “International Financial Reporting Standards” as adopted by the EU) are to be used. GAPSME superseded the previous GAPSE framework, widening thresholds and increasing eligibility.

For an entity to qualify as an SME, 2 out of the 3 following criteria must be satisfied:

  Small Medium
Balance Sheet Total ≤ €4,000,000 ≤ €20,000,000
Total Revenue ≤ €8,000,000 ≤ €40,000,000
Average number of employees ≤ 50 ≤ 250

Large and Public Interest Entities do not enter the required fields of GAPSME and are obliged to prepare a full set of financial statements in accordance with IFRS (as adopted by the EU).

The below disclosures are requirements for Financial Statements:

ALL SME’s financial statements should (as a minimum) include

  • The balance sheet
  • Income statement
  • Notes to the financial statements

For medium-sized entities, a statement of changes in equity and cash flow are required.

Entities are also required to disclose

  • The information necessary to identify the register with which the entity is registered
  • The number of the company in the register
  • The legal form of the company, the location of the registered office
  • The fact that the company is wound-up (where appropriate)

The Directive imposes a limited number of disclosers for small entities which are then increased for medium-sized entities.

Requirements for Small Entities Requirements for Medium Entities
Balance sheet Balance sheet
Income statement Income statement
Notes to financial statement Statement of changes in equity
Statement of cash flow
Notes to financial statements

Consolidation for small groups

Small groups of companies are exempt from preparing consolidated financial statements. For a group to be considered small, it should not exceed any two of the following thresholds.

Net Gross
1.      Balance sheet total ≤ €4,000,000 ≤ €4,800,000
2.      Total revenue ≤ €8,000,000 ≤ €9,600,000
3.      Average number of employees ≤ 50 ≤ 50

Amendments of the Companies Act

With the implementation of GAPSME, the Maltese Companies Act (Cap. 386) was amended to reflect the provisions of the Single Accounting Directive. The main amendments include:

  • The thresholds for entities to be classified ‘small’ are now in line with the GAPSME regulations. Companies are obliged to examine if they fall within the GAPSME thresholds to benefit from simpler disclosure requirements.
  • Small companies are no longer required to prepare a director’s report.
  • Financial holding companies are no longer exempt from preparing consolidated financial statements.
  • Companies are no longer able to extend the filing deadline for accounts with the registry of companies to 18 months. 
  • Oversea companies are now required to file copies of their accounts within 12 months from the end of every accounting period.

In Malta, all companies are required to keep proper accounting records and GCS Malta, one of the leading accounting firms are here to help you. Looking for accounting firms? Get in touch with us today on +365 79578002 or send us an email on [email protected].

No Comments

Sorry, the comment form is closed at this time.