Recent amendments to financial reporting obligations present company directors with a number of possible different scenarios, including which accounting rules to apply, which financial statements components to prepare and/or file with the Registrar of Companies, which consolidation exemptions remain available and on what conditions, whether to prepare a directors’ report and what new requirements are to be included therein when applicable, and which disclosures are still required to be made in the financial statements.
IFRS as adopted by the EU is no longer the default set of accounting rules for Maltese small- and medium-sized companies that are not Public Interest Entities (PIE), and in order to continue applying EU-IFRS such companies need to specifically resolve to do so. Otherwise, compliance with the General Accounting Principles for SMEs (GAPSME) would be required.
There is also now the demise of:
• the concept of abridged accounts,
• the consolidation exemption for financial holding parent companies,
• the filing exemption of profit and loss account disclosures for small private exempt companies, and
• the extension of the period allowed for laying accounts before the general meeting for companies with business interests outside Malta.
This new reality, which applies for accounting periods commencing on or after January 1, 2016, results from an EU-inspired simplification exercise aimed at reducing reporting requirements for small- and medium-sized entities. Nonetheless, until the changes become well understood, they can present a challenging maze of new rules and regulations.
Accordingly, Deloitte Malta has issued a publication, entitled Changes in Financial Reporting – Effective 2016 and beyond, to assist company directors and accountants in the preparation of company financial statements. The following is a summary of the financial reporting considerations included in the publication:
Size thresholds: the size thresholds for small companies (and groups) are revised and thresholds for medium-sized and large companies (and groups) are introduced. In terms of the EU Accounting Directive, PIEs shall be treated as ‘large’, regardless of their size.
Default generally accepted accounting principles and practice: for financial periods commencing on or after January 1, 2016, small- or a medium-sized companies other than PIEs are generally required to apply GAPSME unless the directors resolve otherwise.
Financial statements components: small companies that apply GAPSME are not required to draw up a statement of changes in equity and a statement of cash flows.
The directors’ report: small companies other than PIEs are exempted from the requirement to prepare and to file a directors’ report to the extent that a declaration to that effect is delivered to the Registrar. The directors’ report of medium-sized and large companies and PIEs shall include additional information.
Exemptions: the concept of abridged annual accounts is no longer applicable. Small companies that are private exempt are however exempted from the requirement to file their profit and loss account to the extent that a declaration to that effect is delivered to the Registrar.
Group exemptions: the financial holding company exemption is no longer available. The size exemption and the intermediate parent company exemption continue to be applicable but a parent company is not eligible for the size exemption if any of the group companies is a PIE.
Additional disclosures: the amended Third Schedule to the Maltese Companies Act contains additional disclosures that need to be included in the notes to the financial statements.
The publication may be downloaded from www.deloitte.com/mt
Giselle Cini is a principal in Deloitte Malta’s Technical Department.