Maltese Companies Act requires the directors of a parent company that owns one or more subsidiaries to prepare consolidated financial statements of the group on an annual basis provided that it is classified as a small group as defined in GAPSME and no consolodation is required.
The group thresholds are as follows:
In order to meet the thresholds noted above, one would need to meet, on a consolidated basis, two of the 3 criteria mentioned above. In case that the group fails within the definition of ‘Medium sized Group’, the directors have an option to consolidate using GAPSME as opposed to IFRS as adopted by the EU.
The rules of consolidation under the Maltese Law does include, following the publication of LN 289 of 2015, a number of exemptions of non consolidation. A summary of these exemptions are set out below:
Exemption 1: Size of the Group
A group qualifies as a small group in relation to an accounting period if it does not exceed the limits of two of the three following criteria:
- Aggregate balance sheet total: less than or equal to €4 m net/4.8 m gross;
- Total revenue:less than or equal to €8 m net/9.6 m gross;
- Aggregate number of employees: less than or equal to 50
If the conditions are not met for two consecutive periods, then consolidated financial statements will have to be prepared at the level of the Maltese Parent Company.
Exemption 2: When the results of the Maltese Group are consolidated further up
No consolidation is required at Malta level if the results of the Maltese Group (i.e. the results of the Maltese parent company and all of its subsidiary undertakings) are included in the consolidated results prepared at a higher level. This exemption is subject to:
- the results of the Malta Group are included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same accounting period, by a parent company formed and registered under the law of a Member State or an EEA State;
- the consolidated accounts and the director’s report thereon are drawn up in a manner equivalent to that required by this Act and have been subject to an audit;
- the Maltese parent company discloses in its individual accounts that it is exempt from the obligation to prepare and deliver consolidated accounts;
- the Maltese parent company states, in its individual accounts, the name of the parent undertaking which draws up the consolidated accounts referred to above;
- the Maltese parent company delivers to the Registrar within the period allowed for delivering its individual accounts, copies of the consolidated accounts referred to above including the directors' report and the auditors’ report on those consolidated accounts; and
In case any document comprised in the financial statements delivered is in a language other than English, certified translation of it into English is required.
Exemption 3: Temporary Structure
A subsidiary undertaking may be excluded from consolidation where the interest of the parent company is held exclusively with a view to subsequent resale and the undertaking has not previously been included in consolidated accounts prepared by the parent company.