Finance Parliamentary Secretary Tonio Fenech launched the draft proposal of a new simplified system of financial reports aimed specifically for small and medium businesses that will reduce red tape and the cost of drawing up financial statements.
During a press conference held at the Malta Stock Exchange, Mr Fenech explained that thanks to the General Accounting Principles for Smaller Entities (GAPSE), small companies no longer have to draw up a 7,000+ pages financial statement.
“We saw what the needs of small companies were and put together GAPSE in an effort to reduce red tape and the cost to draw up the financial report,” he said.
Accountancy Board chairman Joseph Zammit Tabona explained that reducing administrative burdens on business entities would help them become more competitive.
The president of the Malta Institute of Accountants (MIA) Simon Flynn pointed out that the financial statements prepared under GAPSE are not a “set of abridged or limited disclosure financial statements.”
“On the contrary, these are financial statements which are pitched to give an appropriate, but not excessive or over complicated level of information to their users,” he said.
Mr Flynn said that the MIA will organise a number of informative events presenting GAPSE in more detail to help people understand the principles from a technical perspective.
Mr Fenech explained that the project was launched last year in an attempt to “establish a leaner financial reporting framework for small entities.”
He added that this will also reduce the costs of smaller companies who have had to comply with the “heavy reporting requirements of the International Financial Reporting Standards (IFRS).”
The parliamentary secretary pointed out that all large companies started out as small companies “that still need to be nurtured while still inducing a fair and professional playing field for all.”
GAPSE will be of further advantage to Malta as 98 per cent of businesses are classified as small and medium enterprises, he said.
While the new standards will lower the costs and complexity to SMEs and their financial service providers in financial statements, it will ensure that the financial statements will continue “along standardised lines that are more comprehensive and relevant to SMEs,” said Mr Fenech.
GAPSE may be applied to companies that fulfil two of these conditions: 10 or fewer employees, balance sheet not exceeding Lm214,650/ e500,000 and a total revenue of Lm429,300/e1 million.
However, entities whose shares, stocks or debt is listed, public companies and entities requiring a licence to provide a financial and utility service cannot use GAPSE.
Companies that are able to make use of GAPSE will be able to do so, in lieu of IFRS, for the financial period starting on or after 1 January 2008.
However, Mr Fenech pointed out that the use of GAPSE is not mandatory on any company – regardless of the size.
“It is an option which can be used by companies falling below pre-defined thresholds which are in line with similar EU criteria,” he said.
Mr Fenech made it very clear that GAPSE does not translate into a decrease in financial reporting standards but “seeks to give the users of financial statements of SMEs more relevant accounting information.”
He invited all stakeholders to put forward their comments and proposals during the two-month consultation period that will end on Friday, 15 February.