• National Professional Organisation Website: The Malta Institute of Accountants
• Response to IFAC Member Body Survey on Standard Setting and Regulation

Financial reporting framework in Malta

Adoption of IFRSs in Europe effective in 2005

In June 2002, the European Union adopted an IAS Regulation requiring European companies listed in an EU securities market, including banks and insurance companies, to prepare their consolidated financial statements in accordance with IFRSs starting with financial statements for financial year 2005 onwards. EU countries have the option to:

• Require or permit IFRSs for unlisted companies.
• Require or permit IFRSs in parent company (unconsolidated) financial statements.
• Permit companies whose only listed securities are debt securities to delay IFRS adoption until 2007.
• Permit companies that are listed on exchanges outside of the EU and that currently prepare their primary financial statements using a non-EU GAAP (in most cases this would be US GAAP) to delay IFRS adoption until 2007.

The European IAS regulation applies not only to the 27 EU Member States but also to the three members of the European Economic Area (EEA) - Iceland, Liechtenstein, and Norway -, as well as, for the time being, the United Kingdom.

Malta is an EU Member State. Consequently, Maltese companies listed in an EU/EEA securities market follow IFRSs since 2005. The European Commission (EC) periodically issues a document which summarises the use of options of the IAS Regulation by European Union Member States. For information on each country's plans, click to access:

• Table on use of IFRS options in 28 EU Member States

The European Commission has adopted the following wording for use in the notes to the accounts and in the audit reports of companies subject to EU Regulation 1606/2002/EC (the 'IAS regulation'):

• "in accordance with International Financial Reporting Standards as adopted by the EU" or
• "in accordance with IFRSs as adopted by the EU".

Companies may also state, in a footnote, compliance with IFRSs as adopted by the IASB, if that is the case.

Malta requires all companies that listed companies use IFRSs; for domestic unlisted companies the use of IFRSs is permitted.

Background on accounting profession in Malta

The Act requires the annual accounts of every company to be audited in accordance with International Standards on Auditing, with the exception of private companies, which on their balance sheet dates do not exceed the limits of two of the following three criteria:

1. balance sheet total: twenty thousand liri,
2. turnover: forty thousand liri,
3. average number of employees during the accounting period: two.

Notwithstanding the above, such private companies are still required to submit audited annual figures to the Inland Revenue.

Articles 167 and 171 of the Act govern the content and form of individual accounts and of consolidated accounts respectively. According to both articles, accounts shall be drawn up clearly and in accordance with the provisions of the Act and with generally accepted accounting principles and practice. Compliance with "generally accepted accounting principles and practice" is defined in Article 2 (4) of the Act as adherence to International Accounting Standards as may be issued from time to time by the International Accounting Standards Board, or any other body succeeding it by whatever name it may be known, and to any accounting standards as may be made applicable from time to time in terms of the Accountancy Profession Act (see below).

In the event that a provision of the Act is in conflict or is not compatible with generally accepted accounting principles and practice, the accounts are required to be drawn up so as to give a true and fair view of the assets, liabilities, financial position and profit or loss of the company (or companies in the case of consolidated accounts).

Local recognition of accountancy as a profession came about in 1979 with the enactment of the Accountancy Profession Act, Cap 281. This Act regulates the accountancy profession in Malta.

Legal control of the local profession rests with the Accountancy Board, a Government body appointed in terms of the Accountancy Profession Act. The Accountancy Board participates actively in the European Commission proceedings on accountancy and auditing in Brussels. Directives are issued by the Accountancy Board in terms of the Accountancy Profession Act and of the Accountancy Profession Regulations. To date, the following Directives have been issued:

• The Accountancy Profession (Continued Professional Education) Directive 2004
• The Accountancy Profession (Code of Ethics for Warrant Holders) Directive 2004
• The Accountancy Profession (Annual Return and Registration Fees) Directive 2004.

The Accountancy Board has the collaboration and technical support of the Malta Institute of Accountants (MIA), which is an Approved Accountancy Body as established under the Accountancy Profession Act. In 1977, the MIA became a founder member of the International Federation of Accountants and the International Accounting Standards Committee. The MIA is also a member of the Federation des Experts Comptables Europeens (FEE). The MIA is responsible for fostering the profession and for maintaining quality by providing Continuing Professional Education and by monitoring compliance with ethical, accounting, and auditing standards.