Group consolidation is the process of presenting the financial position and results of a parent company together with its subsidiaries in a single set of financial statements. This provides stakeholders with a comprehensive view of the overall performance and financial health of the group.

In Malta, the obligation to prepare consolidated financial statements is primarily governed by the Companies Act (Cap. 386) and the applicable financial reporting framework, which may be GAPSME or IFRS as adopted by EU.

When are consolidated financial statements required?

A Maltese parent company is generally required to prepare consolidated financial statements if it controls one or more subsidiaries, unless the group qualifies for an exemption as explained below.

Exemptions from preparing consolidated financial statements

Small group exemption

A parent company is exempt from preparing consolidated financial statements if, on a consolidated basis, the group does not exceed two of the following size thresholds for two consecutive reporting periods:

• Aggregate balance sheet total: up to €4,000,000 (net) or €4,800,000 (gross)
• Aggregate turnover: up to €8,000,000 (net) or €9,600,000 (gross)
• Average number of employees: up to 50

Gross values reflect figures before consolidation adjustments (i.e., prior to eliminating intra-group balances and transactions), while net values represent amounts after such eliminations.

Parent company that is itself a subsidiary

A Maltese parent company that is itself a subsidiary of a larger group may be exempt from preparing consolidated accounts, provided all of the following conditions are met:

• The Maltese company is included in consolidated accounts of a larger group prepared to the same date, or an earlier date within the same accounting period, by parent registered in an EU or EEA Member State;
• If the parent is registered outside the EU or EEA, the Maltese company is included in consolidated accounts prepared to the same date or earlier, where those accounts and the directors’ report comply with requirements equivalent to Malta’s Companies Act and have been audited under the laws governing that parent company;
• The Maltese company clearly discloses the exemption and specifies the name and registered office of the parent in its individual financial statements;
• Copies of the consolidated accounts and directors’ report of the larger group are filed with the Malta Business Registry, including a certified translation into Maltese or English if required.

This exemption does not apply if the Maltese company’s securities are admitted to trading on a regulated market or an equivalent market outside the EU/EEA.

Exclusions for certain subsidiaries
Certain subsidiaries may be excluded for consolidation if:

• Severe, long-term restrictions substantially hinder the parent company’s ability to exercise control over the assets or management of the subsidiary; or
• The subsidiary is held exclusively for resale and has not previously been consolidated by the parent; or
• In extremely rare cases, where preparing consolidated accounts would impose disproportionate expense or undue delay due to lack of information.

Where all subsidiaries fall within these exclusions, consolidated financial statements are not required.

How can we help?

Our team is available to assist your Company in navigating consolidation requirements and identifying applicable exemptions. We offer comprehensive support in the preparation of consolidated financial statements and the conduct of consolidation audits. Please feel free to contact us for further information.