One of the most common questions we receive from clients setting up in Cyprus is: which accounting standard do we need to follow? The answer depends on the nature, size, and structure of your company.
The Two Main Frameworks
**IFRS (International Financial Reporting Standards)** is mandatory for companies whose securities are listed on the Cyprus Stock Exchange or any other regulated market within the EU. For all other companies, **Cyprus Local GAAP** — based on the IFRS for SMEs standard with certain local modifications — may be applied.
In practice, many international holding companies and subsidiaries of foreign groups choose to voluntarily apply full IFRS even when not strictly required, either to satisfy parent company reporting requirements or to facilitate external financing.
Key Differences That Matter
The differences between full IFRS and Cyprus Local GAAP are meaningful in several areas: - **Financial instrument measurement** (IFRS 9 vs simplified approaches) - **Revenue recognition** (IFRS 15 vs local rules) - **Lease accounting** (IFRS 16 requires capitalisation of most leases — Local GAAP does not) - **Impairment testing** (more frequent and detailed under full IFRS)
For most SMEs, Local GAAP reduces complexity and compliance cost considerably. For companies anticipating external investment or an eventual exit, IFRS-compliant accounts may be expected by investors.
Audit Requirements
All Cyprus companies with assets exceeding €1 million, turnover exceeding €1 million, or more than 10 employees are subject to statutory audit under the Cyprus Companies Law. Smaller companies may qualify for an exemption. Our audit team can confirm your status and ensure your financial statements meet the required standard.
Contact us to discuss which framework best suits your business.
