General Accounting Principles for Small and Medium Sized Entities (GAPSME) or International Financial Reporting Standards (IFRS) are the financial reporting frameworks used in Malta.  GAPSME derived from the EU Accounting Directive 2013/34/EU which introduced a new set of financial reporting requirements with the aim of simplifying accounting standards universally across EU member states. This directive was transposed into local Maltese legislation via the issue of Legal Notice 289 of 2015 – Accountancy Profession General Accounting Principles for Small and Medium Sized Entities and also through amendments to the Malta Companies Act.

As from 1 January 2016, GAPSME became the default accounting framework for small and medium businesses. Should a company still wish to prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, the Board of Directors are required to pass a resolution stating that IFRS is their chosen accounting framework to be used for financial reporting.

GAPSME applies to small and medium sized businesses if they satisfy two out of three of the size conditions as per below:

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

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.

If you require assistance and advice with back-office services such as preparing financial statements, balance sheets, income statements or supporting notes, contact our team today to arrange a consultation by calling us directly on +356 2122 7553 or email us on, and we will respond to you within 24 hours.

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