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12 December 2016

Effective from September 2016 Cyprus Companies Law was amended to incorporate the provisions of the EU Accounting Directive (2013/34/EU) into domestic Law. This circular summarizes the main changes that are relevant to Cyprus companies.

Categories of Companies and Groups


  1. ‘Net turnover’ means the amounts derived from the sale of products and the provision of services after deducting sales rebates and value added tax and other taxes directly linked to turnover.
  2. .Where groups are concerned it is possible to offset the following intercompany balances and transactions:
    • Intercompany assets and liabilities;
    • Intercompany revenues and expenses;
    • Unrealized profits/losses on intercompany transactions;
    • The carrying value of the share capital of group entities and the percentage of the share capital of subsidiaries participating in the group can be netted-off against the percentage of their Net Assets.  

Where offsetting is not applied the limits for the Net Turnover and Total Gross Assets criteria shall be increased by 20%.

Exemptions from Consolidation

The following are exempted from the requirement to prepare consolidate financial statements:

  • Small and Medium-size groups  except where any company in the group is a public-interest entity or where the obligation to draw up consolidated financial statement is required by other legislation. (Article 142(1)(ε)). 
  • Groups that have higher level parents that publish consolidated financial statements on the basis of Generally Recognized Accounting Principles.

It should be noted that the provisions for consolidation exemption which previously existed in the case of (i) severe and long-term restrictions, (ii) disproportionate cost or undue delay and (iii) held exclusively with the view to subsequent sell have been abolished and no longer apply.

Additional Disclosures in the Financial Statements

All companies must disclose the average number of employees employed during the financial year in the notes to the separate financial statements and consolidated financial statements. Medium-sized companies, Large companies and Public Interest Entities (PIEs) should:

  1. disclose separately either in the income statement or the notes to the financial statements  the staff costs relating to the financial year, broken down between wages and salaries, social security costs and pension costs; 
  2. disclose the name and registered office of the company which prepares Consolidated Financial statements for the largest group of companies of which the company is a subsidiary and the location from which users can obtain the Consolidated Financial Statements (assuming such information is available); and
  3. disclose the name and the registered office of the company which prepares Consolidated Financial Statements for the smallest sub-group of companies of which the Company is a subsidiary  and which is also included in the largest group of companies.

Large size companies and public interest entities are required 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 assurance services, for tax advisory services and for other non-audit services. This is no longer required for small and medium sized companies.

Management Report

The revised Law introduces the term ‘Management Report’ to replace the term ‘Directors Report’. Most of the provisions relating to the content of this report remain the same, however some new ones were introduced and a few others were amended.

Small companies the shares of which are not listed in the regulated markets of any EU member state, and which are exempt in accordance with this revised law from the obligation to prepare consolidated financial statements, are exempt from the obligation to prepare management report, provided that the requirements concerning the acquisition of their own shares, set out in the subparagraph (g) of paragraph (iii) below, are provided in the notes to the financial statements.

Small and medium-size groups are exempted from the obligation to draw up a consolidated management report as set out in paragraph (b), except where any company in the group is a public-interest entity.

The following paragraphs provide a brief summary of some of the key requirements regarding the content of the Management Report.

  1. Description of the position and the expected developments of the affairs of the company or the group;

    a. Review of the development and performance of the company’s business and of its position, together with a description of the principal risks and uncertainties that it faces providing a balanced and comprehensive analysis consistent with the size and complexity of the business and to the extent necessary shall include both financial and non- financial key performance indicators relevant to the particular business, including information relating to environmental and employee matters.  Medium-sized companies which are exempt from the obligation to prepare consolidated financial statements are exempt from these obligations in so far as they relates to non-financial information.
  2. The management report shall also give an indication of:

    a. any change during the financial year in the nature of the business of the company or in its
    subsidiaries or in the classes of business in which the company has an interest, whether as a member of another company or otherwise, and especially in any takeover or merger which has been realized or intended, whether active or passive;

    b. the company’s likely future development;

    c. activities in the field of research and development;

    d. the existence of branches of the company;

    e. in relation to the company’s use of financial instruments and where material for the assessment of its assets, liabilities, financial position and profit or loss:
    a) the company’s financial risk management objectives and policies, including its policy for hedging each major type of forecasted transaction for which hedge accounting is used; and
    b) the company’s exposure to price risk, credit risk, liquidity risk and cash flow risk.

    f. changes in the company’s share capital;

    g. in case of acquisition of own shares, the following information:
    a) the reasons for which own shares were acquired during the year
    b) the number and the nominal value or in the absence of nominal value, the carrying value of own shares acquired and transferred during the year, as well as the part of the issued share capital which they represent
    c) in the case of acquisition or transfer for a price, the relevant consideration
    d) the number and the nominal value or in the absence of nominal value, the carrying value of all the shares purchased and held by the company, and the part of the issued share capital which they represent
    e) in the case of consolidated financial statements the consolidated management report shall indicate the number and the nominal value of all the parent company’s shares held by that parent company, by subsidiary companies or by any person acting in his own name but on behalf of any of those companies.

    h. significant changes in the composition, distribution of responsibilities or compensation of the Board of Directors;

    i. any important event for the company that has occurred after the end of the financial year;

    j. explanatory recommendation in connection with the distribution of profits, absorption of losses and creation of reserves.

Other Provisions

The revised Law also impacts the corporate governance statement that is required to be included in the management report of companies whose shares are listed in the stock exchange of any EU member state and also introduces provisions in relation to reporting of payments to governments, for specific types of entities, which are effective for periods beginning on or after
1 January 2016.


A number of group’s previously taking exemption from preparing consolidated financial statements will now be obliged to prepare consolidated financial statements.  Enterprises should take action early to understand, address, and manage the reporting process so that there are no surprises.  Our audit partners are available to discuss the new reporting obligations with you and to assist you in their implementation.