• GAPSME: General Accounting Principles for Small and Medium Enterprises
  • March 30, 2017 | Authors: Kurt Hyzler; Luca Vella; Andrew J. Zammit
  • Law Firm: GVZH Advocates - Valletta Office
  • The EU Single Accounting Directive 2013/34/EU, which repealed the 4th and 7th Accounting Directives on Individual and Consolidated Accounts, introduced a simplified procedure for financial statement reporting. This Directive was transposed into Maltese law via legal notice 289 of 2015 in virtue of the ministerial powers conferred on the Minister of Finance in virtue of the Accountancy Professions Act (Chap. 281 of the Laws of Malta).

    The aim of the Directive is to prescribe the general accounting principles, and simplify the procedure in relation to the preparation of statutory financial statements for qualifying micro, small and medium entities. GAPSME is now the default accounting framework for SMEs in relation to financial reporting periods starting on or after 1 January 2016, unless a resolution is passed by the Board of Directors to the effect that IFRSs (or the “International Financial Reporting Standards” as adopted by the EU) are to be used. GAPSME superseded the previous GAPSE framework, widening thresholds and increasing eligibility.

    How does one classify SMEs in terms of the rules?

    In order for an entity to qualify as an SME , 2 out of the 3 following criteria must be satisfied:




    Balance Sheet Total

    = €4,000,000

    = €20,000,000

    Total Revenue

    = €8,000,000

    = €40,000,000

    Average number of employees

    = 50

    = 250

    Large and Public Interest Entities fall outside the scope of GAPSME, and are therefore obliged to prepare a full set of financial statements in accordance with IFRS (as adopted by the EU).

    Disclosure Requirements for Financial Statements:

    All SME’s financial statements should (as a minimum) include:
    • the balance sheet,
    • income statement and
    • notes to the financial statements.
    A statement of changes in equity and statement of cash flows are only required for medium sized entities.

    Entities are also required to disclose:
    • the information necessary to identify the register with which the entity is registered,
    • the number of the company in the register,
    • the legal form of the company, the location of the registered office and,
    • (where appropriate) the fact that the company is being wound-up.
    The Directive imposes only a limited number of disclosers for small entities, these are then increased for medium sized entities.

    Requirements for Small Entities

    Requirements for Medium Entities

    Balance sheet

    Balance sheet

    Income statement

    Income statement

    Notes to financial statement

    Statement of changes in equity


    Statement of cash flow


    Notes to financial statements

    Consolidation for Small Groups

    Small groups of companies are now exempt from preparing consolidated financial statements. In order for a group to be considered “small”, it should not exceed any 2 of the following thresholds.


    Small Groups




    1.      Balance sheet total

    = €4,000,000

    = €4,800,000

    2.      Total revenue

    = €8,000,000

    = €9,600,000

    3.      Average number of employees

    = 50

    = 50

    Amendments to the Companies Act

    Along with the introduction of GAPSME, the Maltese Companies Act (Cap. 386) was amended in order to reflect the provisions of the Single Accounting Directive. The main amendments include, inter alia:
    • The thresholds for entities to be considered ‘small’ are now in line with the rules contained in GAPSME. Companies are now obliged to enquire whether they fall within the GAPSME thresholds in order to benefit from simpler disclosure requirements.
    • Small companies are no longer required to prepare a director’s report.
    • Financial holding companies are no longer exempt from preparing consolidated financial statements.
    • Companies are no longer able to extend the filing deadline for accounts with the registry of companies to 18 months. (This option was previously available to companies carrying on business, or having business interests of more than 90% outside Malta).
    • Oversea companies are now required to file copies of their accounts within 12 months from the end of every accounting period.