The accounting profession is hardly known for emotional outbursts, but the Single Accounting Directive which must come into force by the end of 2015 is prompting phrases like “earth-shattering” and “ferocious exchanges”.

There are 28,500 microenterprises in Malta

At its core, the Directive was meant to create harmonised accounting standards across the EU based on the principle of “Think Small First!” The first article establishes a very basic set of accounting and reporting requirements for micro enterprises – with member states given a number of key options on even these minimal obligations.

Subsequent articles then introduce more and more onerous requirements as the companies involved get larger. The Directive, which has been years in the drafting, was approved by the European Parliament on June 12 and it is claimed that the simpler procedures will represent a saving of €1.7 billion for microenterprises.

After the vote, a briefing session was promptly organised by the Malta Business Bureau and the Malta Institute of Accountants, with the help of the European Parliament office, which was attended by scores of practitioners. But it was very clear from the outset of the meeting that this Directive has opened a can of worms.

MIA president Anthony Doublet set the tone when he said in his opening speech that accounting should not be described as a “burden”, going on to say that member states needed to find a balance between simplification and the need to provide information in the interests of investors, shareholders, tax authorities and also banks.

But Claudine Cassar of IT company Alert, who took part in a panel discussion, made it clear that she felt most of the information in the annual accounts had little or no value.

“I spend €13,000 a year for the audits of my three companies, not to mention the wages I have to pay to the people who have to collect the information required, money which could be much better spent!” she said.

When it was pointed out by another of the panel members, Bernard Scicluna of Deloitte that Malta introduced reduced reporting requirements in 2009 – the GAPSE rules – Ms Cassar was even more incensed, saying that it was upto accountants to inform her that these existed.

Mr Scicluna could only concur.

“We are not promoting GAPSE and the take-up is very low. This is our shortcoming as a profession,” he said. “GAPSE is based on a profit-and-loss statement which requires only O level accounting to prepare but it could be that accountants do not bother to promote it because it would involve having to change the template for each client,” he admitted.

Another panel member, Paul Bugeja representing the MHRA said that even if the Government were to adopt very limited reporting for microenterprises, there was nothing to preclude companies from asking for more detailed ones to be prepared on an ad hoc basis when these were required for bank loans, tenders and so on.

It was Mark Abela, the MIA’s technical director, who described the changes as “earth-shattering” as they created a situation far removed from the basic concepts and principles he had been thought when at University.

It is not only locally that Directive has caused ripples of concern. Panel moderator Peter Agius, from the European Parliament office in Malta, said that in Brussels, he attended a meeting where there were “ferocious exchanges” between member states.

The MIA and MBB will now be drawing up their position to present to the Government, which has to decide on various options such as whether management reports are required, when TFV needs to be declared and so on.

A copy of Mr Abela’s detailed presentation is available on both the MIA and MBB websites.

There are 28,500 microenterprises in Malta, which represent over a quarter of all the value-added in the economy.

Microenterprises are defined as companies which do not exceed two of the following three criteria: a balance sheet of €350,000; a turnover of €700,000; and average staff of 10.