GAPSME: Its Effect on Maltese Companies



In August 2015, the General Accounting Principles for Small and Medium-sized Entities (GAPSME) Legal Notice was published. It has replaced the General Accounting Principles for Smaller Entities (GAPSE) which needed to be updated to reflect the requirements of EC Directive 2013/34/EU. This Directive brought about a new set of financial reporting requirements for both separate and consolidated financial statements.

GAPSME can be applied for financial reporting periods beginning on or after 1 January 2016. It is the default accounting framework for small and medium-sized entities (SMEs). However, through a board resolution, SMEs may still opt to prepare their financial statements in accordance with international financial reporting standards (IFRSs) as adopted by the EU (European Union).

GAPSME: Its Applicability

GAPSME applies only to those entities which satisfy two of the three eligibility criteria in below table. It cannot be applied by large and public interest entities (PIEs). These entities must prepare their financial statements in accordance with IFRS.

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

Presentation and Disclosure Requirements

For a small entity, a complete set of financial statements comprises:

  1. A balance sheet
  2. An income statement
  3. Notes to the financial statements

A medium-sized entity should also prepare:

  1. A statement of changes in equity
  2. A statement of cash flows

For small entities, there are a limited number of disclosure requirements but these have been increased for medium-sized entities.

Small groups, which do not exceed any two of the three thresholds in the following table, are exempt from preparing consolidated financial statements under GAPSME.

Net Gross
Balance Sheet Total ≤ 4 million ≤ 4.8 million
Total Revenue ≤ 8 million ≤ 9.6 million
Average Number of Employees ≤50

Most of the fundamental recognition and measurement principles previously set out in GAPSE are still applicable under GAPSME. Some major changes have been applied to the recognition and measurement of financial instruments.

Changes to the Companies Act

With the introduction of GAPSME, the Companies Act has also been amended. 

  1. Thresholds for small companies were revised to match the GAPSME requirements.
  2. Small companies are exempted from the requirement to prepare the directors’ report. Where the company which qualifies as a small company is a private company having the status of an exempt company, it needs not deliver to the Registrar the directors’ report and the income statement.
  3. The possibility of abridged accounts for small entities has been removed.
  4. The possibility for certain companies to extend the period allowed for laying accounts to eighteen months will no longer be available.
  5. The exemption from the requirement to prepare consolidated financial statements applicable to financial holding companies has also been removed.

The previous 3rd and 4th Schedules have been merged into one. The new 3rd Schedule of the Act is divided into two parts. Part I deals with the additional provisions applicable to the annual financial accounts of large, medium-sized and other undertakings, where applicable whereas Part II deals with the additional provisions applicable to consolidated accounts.


GAPSME’s success will ultimately depend on its take up by small and medium-sized entities. GAPSME has simplified the financial reporting obligations of these entities, which are the backbone of the Maltese economy.  It is expected to increase harmonization across member states, leading to greater comparability of financial statements.

For further information, please contact:

Michelle Vassallo Pulis
Technical Manager