If a business exceeds the small business conditions as per the above table it automatically moves into the medium sized business threshold and must adopt the rules as per the regulation with regards medium sized entities. Should the business then exceed these conditions for a medium sized entity it must stop using GAPSME in its entirety 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 determine whether the conditions have been met by assessing the net assets of the balance sheet, the total revenue on the income statement and the number of employees the business employs as per the guidelines of GAPSME. If the business has exceeded more than two of the above tests it is deemed to have not satisfied the conditions applicable. In the cases of longer or shorter periods of financial reporting the total revenue included in the test is the total figure divided by the total months of the period and multiplying by twelve.
For businesses that qualify as a small sized entity the financial statements shall comprise of a balance sheet, income statement and supporting notes. There is no need for cash flows, a statement of equity and the notes are of a simplified nature. For medium-sized entities the financial statements shall also comprise of a statement of changes in equity and a statement of cash flows. There is also a heavier emphasis on the disclosure of notes but still simplified in some cases in comparisom with International Financial Reporting Standards.
On filing the audited financial statements in Malta with the Malta Business Registry the business must submit a relevant DD2 form for the first accounting period and a DD1 form for every subsequent annual filing. This form is signed by the Board of Directors.