Recent legislative developments in Cyprus aim to simplify the financial reporting obligations applicable to smaller businesses. On 6 February 2026, the Companies (Amendment) Law of 2026 and the Financial Reporting Standards Setting Law of 2026 were published in the Official Gazette of the Republic of Cyprus.
These legislative changes establish the legal basis for the development of a new financial reporting framework tailored specifically to small-sized entities, known as the Financial Reporting Standard for Small-sized Entities (FRS for SEs) (the “Standard”).
The purpose of this initiative is to introduce a more proportionate reporting framework for smaller companies, while maintaining transparency, reliability, and alignment with international accounting practices.
Current status of the standard
Although the legislative framework has now been enacted, the FRS for SEs has not yet become effective. The Standard will only enter into force once the necessary institutional procedures have been completed.
These procedures include:
- Finalization of the Standard by the Institute of Certified Public Accountants of Cyprus (ICPAC)
- Formal approval by the Minister of Finance
- A review process to ensure compatibility with the European regulatory framework, including consultation at European Commission level
The official effective date, together with any transitional provisions, is expected to be announced following the completion of these procedures.
Purpose of the FRS for SES
The FRS for SES has been designed to address the specific needs of small-sized entities, taking into consideration their scale of operations and reporting capabilities.
The new framework aims to:
- Provide a simplified financial reporting structure for small businesses
- Maintain transparency and reliability in financial reporting
- Ensure comparability of financial information while reducing unnecessary complexity
The adoption of the Standard will be voluntary, allowing eligible entities to determine whether its application is suitable for their reporting needs.
Governance and oversight
The legislation also establishes a governance structure responsible for the development and supervision of the new Standard.
In particular:
- A dedicated Council will be responsible for overseeing the setting, monitoring, and evaluation of the Standard.
- ICPAC has been designated as the competent authority responsible for drafting and developing the FRS for SEs.
- The Minister of Finance retains the authority to grant the final approval for the adoption of the Standard.
This structure ensures that the Standard is developed under appropriate professional supervision and remains aligned with both national regulatory requirements and internationally accepted accounting practices.
Entities eligible to apply the standard
The FRS for SEs is intended exclusively for small entities, as defined under the Companies Law, Cap. 113.
However, the following entities will not be permitted to apply:
- Public interest entities as defined under the Companies Law, Cap. 113
- Entities whose shares are admitted to trading on markets outside Cyprus
- Entities regulated by:
- the Central Bank of Cyprus
- the Superintendent of Insurance (except small insurance intermediaries)
- the Cyprus Securities and Exchange Commission (CySEC)
- Entities holding significant participation in the above regulated entities
- Semi-governmental organisations
Application to small groups
According to the Companies Law, Cap. 113, small-sized groups are generally exempt from the obligation to prepare consolidated financial statements, unless:
- a member of the group qualifies as a public interest entity, or
- consolidation is required by other applicable legislation.
Nevertheless, small groups may voluntarily adopt the FRS for SEs if they consider that the framework better serves their financial reporting objectives.
The introduction of the FRS for SEs represents an important step toward simplifying financial reporting for small businesses in Cyprus. By introducing a framework that balances regulatory compliance with practicality, the initiative aims to reduce administrative complexity while ensuring that financial statements remain transparent, reliable, and consistent with international standards.