General Accounting Principles for Small and Medium Sized Entities (GAPSME) or International Financial Reporting Standards (IFRS) are the financial reporting frameworks used in Malta.

EU Accounting Directive 2013/34/EU was transposed as GAPSME in Malta law and made effective from 1 January 2016 and onwards. The intention of GAPSME was a simplified accounting approach for small and medium-sized enterprises (SMEs) within the Union economy. Recognises the central role played by small and medium-sized enterprises (SMEs) in the Union economy and aims to improve the overall approach to entrepreneurship and to anchor the “think small first” principle in policymaking from regulation to public service.

Should a company still wish to prepare financial statements by International Financial Reporting Standards (IFRS) as adopted by the European Union may do so. Still, the Board of Directors must pass a resolution stating that IFRS is their chosen accounting framework for financial reporting.

GAPSME may be applied to small and medium-sized businesses if they satisfy two out of three of the size conditions below:



Balance Sheet Total

≤ €4,000,000

≤ €20,000,000


≤ €8,000,000

≤ €40,000,000

Average Number of Employees ≤ 50

≤ 250


Should the business exceed these conditions for a medium-sized entity, it must no longer use GAPSME and adopt IFRS. GAPSME also does not apply to Public Interest Entities (PIES) and is also not available to some licenced entities authorised by the Malta Financial Services Authority.

A business shall assess the net assets of the balance sheet, the total revenue on the income statement and the number of employees the company employs to determine whether the conditions per the guidelines of GAPSME have been satisfied. In the cases of longer or shorter financial reporting periods than twelve months, the total revenue is pro-rata for twelve months.

The financial statements shall comprise a balance sheet, income statement and supporting notes for businesses that qualify as small-sized entities. For medium-sized entities, the financial statements shall also include information on changes in equity and a view of cash flows. GAPSME emphasises the disclosure of notes but is still simplified compared to International Financial Reporting Standards in some cases.

As per Malta Companies Act, each company registered in Malta has to file the audited financial statements to the Malta Business Registry for each financial year in operation. On filing the audited financial statements, the business must submit a relevant DD2 form for the first accounting period and a DD1 form for every subsequent annual filing, which the directors sign.

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Article written by Braden Debono