According to the European Commission, the proposals to reform current EU accounting rules for preparing companies’ individual and, where relevant, consolidated financial statements is being embarked with a view to improve the quality of the information disclosed while also reducing the administrative burden on small companies.

There are currently in place two separate but inter-related directives governing accounting rules for limited liability companies – a directive regulating individual financial statements, dating from 1978 and another directive covering consolidated financial statements enacted in 1983. These directives provide the necessary rules for the preparation and content of statutory financial statements.

The Commission is proposing to replace these “Accounting Directives” by a single directive. In practice, the proposal will make the financial disclosure requirements for business proportionate to the size of the concerned companies, with a gradual increase in the disclosure obligations for medium-sized and large businesses. For all small companies, the EU accounting reform will see the introduction of a “mini-regime”, whereby such businesses will be able to prepare a simpler profit and loss account, balance sheet as well as a smaller number of accompanying notes on the financial situation of the company.

In principle, the new EU thrust towards the reduction of compliance costs is welcome. However, the proposed text does not resolve matters that easily for businesses irrespective of the size and structure of their commercial set-up. This proposed reform of the EU accounting regime requires greater clarification particularly in relation to another long-standing Commission proposal, dating from 2009, dealing with accounting requirements for micro-entities. Maltese business questions the feasibility of having in place at least three different EU accounting rules, tailored for the requirements of micro, small, medium-sized and finally, large listed companies.

From a Maltese business perspective, the 2009 proposal on exempting micro-entities is a critical development in designing and implementing the new EU accounting rules given the preponderant representation of micro-businesses within Malta’s economic fibre. The Malta Business Bureau therefore calls for a rapid clarification as to how the final political agreement on micro-entities will be integrated into the final text that will constitute the single Accounting Directive, replacing the current fragmented EU legal regime.

This is of significant importance since thanks to the agreed exemption for micro-businesses the proposed reform of the accounting directives would not bring additional and tangible benefits for those Maltese businesses outside the micro category.

For more information on EU affairs related to business, one may contact the MBB on 2125 1719 or email info@mbb.org.mt. one may also visit www.mbb.org.mt