Oct 25, 2016
Law 97(Ι) of 2016, which was published in the official gazette on 23 September 2016, amends the Companies Law Cap 113 in order to transpose the EU Accounting Directive (2013/34/EU) into domestic law.
One of the most significant changes is the abolition of the exemption from audit that was previously available to small or dormant companies.
Other changes relate to the exemptions from certain accounting and disclosure requirements available to companies or groups which are classified as small or medium-sized, according to criteria of gross assets at the last balance sheet date, turnover excluding VAT for the financial year and average number of employees during the financial year. In order to fall within a specific category, at least two of the three measures must be below the prescribed threshold.
|
Total gross assets |
Turnover |
Employees |
Small |
Less than €4 million |
Less than €8 million |
Fewer than 50 |
Medium-sized |
Less than €20 million |
Less than €40 million |
Fewer than 250 |
Large |
More than €20 million |
More than €40 million |
More than 250 |
Exemption from consolidation
Prior to the amendment of the law, small groups of companies were exempt from the requirement to compile consolidated financial statements. This exemption has now been extended to apply to small and medium-size groups except where any affiliated company is a public-interest entity or where the obligation to draw up consolidated financial statements arises under other legislation.
The provisions of the Companies Law exempting groups of companies from preparing consolidated financial statements if the ultimate parent or parent companies publish consolidated financial statements on the basis of Generally Recognized Accounting Principles continue to apply.
The provisions for consolidation exemption provided by article 142.A.(5) of the Companies Law (for example on grounds of disproportionate cost or undue delay or for companies held exclusively with a view to subsequent sale) have been abolished.
Management Report
The Directors Report required to be published under the Companies Law is now called the Management Report. Most of the provisions relating to the content of the report remain unchanged, but there have been some additions and amendments. The principal changes are as follows:
Consolidated management reports should include adequate information to evaluate the position of all companies included in the consolidation.
Additional disclosures required by the amendments to article 142 of the Companies Law
Medium-sized companies, large companies and public interest entities are required to provide additional disclosure in their individual and consolidated financial statements regarding the following matters:
The requirement to disclose the total fees for the financial year charged by each statutory auditor or audit firm for the statutory audit of the annual financial statements, and the total fees charged by each statutory auditor or audit firm for other services no longer applies to small or medium-sized companies.
In addition, the amending law also introduces a prohibition on payment of dividends if any development and formation costs are included as assets in the balance sheet and have not been completely written off, unless the amount of the reserves available for distribution and profits brought forward is at least equal to that of the costs not written off.
The amending law also makes consequential amendments to the Auditors and Statutory Audits of Annual and Consolidated Accounts Laws of 2009 and 2013 regarding the form of audit reports.