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Israel Israel is included in the IFAD GAAP Convergence Studies National Professional Organisation Website: Institute of Certified Public Accountants in Israel Response to IFAC Member Body Survey on Standard Setting and Regulation Update for January 2008 Update for December 2006 Update for June 2005 Update for July 2003 Update for July 2001 Financial Reporting Framework in Israel – January 2008 Starting 1 January 2008, Israel has required IFRSs for listed companies and has made IFRSs optional for others. Listed companies had been permitted to use IFRSs since July 2006. Here are some details of the new requirements: Listed companies. All companies listed on the Tel Aviv Stock Exchange (approximately 820 companies) are required to follow IFRSs, with one mandatory exception and one optional exception: Banks. Banks must continue to follow an accounting framework that is close to US GAAP. Dual registrants. Companies that are dually listed in the United States as well as in Israel may choose to use US GAAP instead of IFRSs. There are approximately 50 such companies. Some of them may now consider switching to IFRSs, now that the SEC no longer requires a reconciliation for Foreign Private Issuers reporting under IFRSs. Subsidiaries and associates of listed companies. In practice, subsidiaries and associates of listed companies will also apply IFRSs in order to meet their shareholders' needs. Consequently, overall a few thousand Israeli companies are expected to use IFRSs as from 1 January 2008. Unlisted companies. All unlisted companies except banks are permitted to follow IFRSs as an alternative to Israeli GAAP. Interim reports. Companies using IFRSs will begin doing so in their interim reports for 2008. Listed companies are required by law to report on a quarterly basis. Auditor's report. The auditor's report will refer to conformity with IFRSs. The exact wording of the auditor's report has not yet been adopted by the Institute of Certified Public Accountants in Israel. Basis of presentation note. Will refer to conformity with IFRSs as required by paragraph 14 of IAS 1. Future changes to IFRSs. These will automatically become mandatory in Israel. An 'endorsement process' will not be followed. December 2006 Update All Domestic Listed Companies May Use IFRSs Effective 1 July 2006, all domestic listed companies in Israel are permitted to use IFRSs. June 2005 Update Israel plans to replace national GAAP with IFRSs in 2008 An agreement has been reached among the Israel Accounting Standards Board, the Institute of Certified Public Accountants in Israel, and the Israel Securities Authority to adopt International Financial Reporting Standards in full, in place of national accounting standards, effective in 2008. In recent years (since 1999) Israeli national accounting standards have been developed on the basis of International Accounting Standards. The change to full IFRS adoption is intended to enhance the worldwide acceptability and understandability of the financial reporting of Israeli companies. In the United States, Israel has more companies registered with the SEC than any foreign country except Canada (over 100 companies). Israel has taken this step in anticipation that non-US companies registered with the SEC will be able to report solely in IFRSs without the US GAAP reconciliation. Many Israeli companies are also listed on European exchanges and, after 2007, those companies will no longer be allowed to use national GAAP for their European regulatory reporting. Additional details will be posted when a formal press release is available. July 2003 Update New Standard: Impairment of Assets Standard No. 15 of the Israeli Accounting Standards Board, Impairment of Assets, went into effect as of January 1, 2003. Standard No. 15 is based on IAS 36 Impairment of Assets Standard. The major difference between Standard No. 15 and IAS 36 is that Standard 15 prohibits the reversal of a goodwill impairment loss, while IAS 36 permits such a reversal, in certain circumstances.In August 2003, the Israeli Accounting Standards Board issued Standard No. 14, Interim Financial Reporting, which is based on IAS 34 Interim Financial Reporting Standard. The standard applies effective January 1, 2003, to all entities that are required or that elect to present interim financial reporting. The major difference between Standard No. 14 and IAS 34 relate to the required comparative periods to be reported. July 2001 Update New Accounting Standards In May 2001, the Israeli Accounting Standards Board issued the following new accounting standards: Accounting Standard No. 7, Post-Balance Sheet Events, based on IAS 10. With respect to a dividend declared subsequent to the balance-sheet date but prior to the issuance of the financial statements, like IAS 10, no liability is recognised for such dividends. However, the dividend must be disclosed as a separate component of equity on the face of the financial statements and in the notes, where IAS 10 requires at least one of these disclosures to be made. The standard will be effective for reporting periods ending 31 December 2001, allowing the Securities Regulations to be amended to conform with the principles set forth in the new standard. Accounting Standard No. 8, Discontinuing Operations, based on IAS 35. The major difference is that the Israeli standard requires the separation of discontinuing operations from continuing operations in the balance sheet, the statement of operations, the statement of cash flows and the notes to the financial statements. The standard will apply to all the discontinuing operations of all companies, and will become effective for reporting periods starting 1 January 2002 (with earlier adoption recommended). One-Year Postponement of Accounting Standard No. 12 - Discontinuing of Adjusting Financial Statements for Inflation The high inflation rates that have prevailed in Israel since the end of the 70s, previously led the Institute of Certified Public Accountants in Israel ("ICPAI") to conclude that financial reporting in historical nominal values was not useful to users of financial statements. Therefore, between 1979 and 1985 the ICPAI issued various pronouncements requiring companies to adjust their financial statements for changes in the general purchasing power of the Israeli currency (as reflected by the rise in the Israeli consumer price index). Certain companies were also required to provide supplementary data concerning the effect of these CPI changes on their financial statements. Due to the low inflation rate in Israel in recent years and with this trend expected to continue, the Israeli Accounting Standards Board issued, in February 2001, an exposure draft stating the need to revert to nominal reporting. The original effective date proposed in the exposure draft was 31 December 2001. This has recently been postponed and the new effective date is 31 December 2002.