General Overview
In June 2005, an agreement was reached among the Israel Accounting Standards Board (IsASB), the Institute of Certified Public Accountants in Israel (ICPA), and the Israel Securities Authority (ISA) to adopt International Financial Reporting Standards (IFRSs) in full, in place of national accounting standards, effective in 2008. Since 1999, Israeli national accounting standards have been developed on the basis of IFRSs, formerly International Accounting Standards (IASs); however they differ substantially from IFRSs. (Deloitte IAS Plus website; Grant Thornton n.d., p. 20)
According to the self-assessment prepared by the ICPA in 2006 as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, commencing January 1, 2008 all domestic listed entities will be required to prepare financial statements in accordance with IFRSs. Effective July 1, 2006, all domestic listed companies in Israel are permitted to use IFRSs. Non- listed entities will be subject to the existing Israeli GAAP which is based on IFRSs but not identical to IFRSs. (ICPA 2006, p. 56; Deloitte IAS Plus website)
As stated in a 2006 IMF report, the Bank of Israel (BoI) is responsible for setting the accounting, financial reporting, and disclosure requirements for the banking system. The BoI has carried out this role in an outstanding fashion and requires banks to follow U.S. generally accepted accounting principles (US-GAAP). Reporting and disclosure requirements are in line with internationally accepted practices and the quality of that reporting is high. However, with the adoption of IFRSs by the ISA for all other public companies, there is the potential for unnecessary confusion. Absent convergence between US GAAP and IFRS, it is possible that beginning in 2008, Israeli banks will be applying US GAAP while all other public companies in Israel apply IFRSs. This will make cross-sectoral comparisons of financial statements difficult. The IMF recommended that the BoI consider developing a transition strategy for the banks to introduce IFRSs by 2008 (or a more manageable timetable if that date would impose onerous system conversion problems for the banks.) The BoI may also wish to consider devolving some aspects of its accounting standard responsibilities to Israel's ICPA, as part of the ICPA's normal standard-setting role. (IMF 2006, p. 110)
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 Securities and Exchange Commission (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 Generally Accepted Accounting Principles (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. (Deloitte IAS Plus website)
The Companies Law 1999 prescribes the format of the financial statements. It does not prescribe the accounting policies to be followed, but requires that the financial statements be in accordance with generally accepted accounting principles. There is no specific Accounting Law in Israel. The IsASB was established upon the agreement between the ISA and the ICPA. The IsASB's standing as the standard setting authority was reinforced in a ruling of the Israeli Supreme Court. The hierarchy of binding accounting principles in Israel was stipulated in Opinion 26 of the ICPA as follows: (1) standards of the IsASB; (2) in the absence of a standard in Israel, Israeli practice (the accounting principle actually practiced in Israel); (3) if there is no standard and no Israeli principle in practice, IFRS. (Grant Thornton n.d., pp. 19-20; ICPA 2005)
The 1999 Companies Law distinguishes between a public corporation and a private corporation, and stipulates that a public corporation presents financial statements in accordance with the Securities Law, and a private corporation present financial statements in accordance with the stipulations of the Companies Law. Every corporation is required to file a report once a year with the Israeli Companies Registrar. In addition, public corporations are required to file their financial statements with the ISA and the stock exchange on which the shares of the company are registered for trade. The Bank of Israel (BoI) issues directives regarding specific accounting standards for Israeli banks. Special professional teams of the Banking Department inspect bank's financial statements to verify compliance with these directives. (ICPA 2005; Grant Thornton n.d., p. 19)
Until March 1997, the Institute of Certified Pubic Accountants in Israel (the
Institute) issued statements on accounting principles that are binding upon its
members and are recognized as Israeli GAAP. As of April 1997, the Institute
and the Israel Securities Authority have transferred the authority for the setting of accounting standards to an independent body formed for this purpose - the IsASB. (BDO Ziv Haft 2006, p. 57)
The Institute of Certified Public Accountants in Israel is a member of the International Federation of Accountants (IFAC). It is also a member of the International Accounting Standards Board (IASB), the Federation des Experts Comptables Europeens (FEE) and the Federation des Experts Comptables Mediterranees (F.C.M.). Additionally, the Institute is affiliated with most international accounting and auditing associations and participates in many of their meetings and conferences. (IFAC website; ICPA website)
The Principles
IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 1 First-time Adoption of International Financial Reporting Standards was issued in June 2003 and applies to an entity whose first IFRS financial statements are for a period beginning on or after January 1, 2004. IFRS 1 also applies to each interim financial report, if any, that the entity presents under International Accounting Standard (IAS) 34 Interim Financial Reporting for part of the period covered by its first IFRS financial statements. (Deloitte IAS Plus website)
IFRS 2: Share-based Payment (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 2 Share-based Payment was issued in February 2004 and applies to annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IFRS 3: Business Combinations (effective 2004) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 3 Business Combinations was issued in March 2004 and is applicable for business combinations for which the agreement date is on or after March 31, 2004. (Deloitte IAS Plus website)
IFRS 4: Insurance Contracts (effective 2006) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 4 Insurance Contracts was issued in March 2004 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
In May 2001, the Israeli Accounting Standards Board issued Accounting Standard No. 8, Discontinuing Operations, based on International Accounting Standard (IAS) 35 issued by the International Accounting Standards Board (IASB) in June 1998 (later withdrawn by the IASB). 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 applies to the discontinuing operations of all companies, and became effective for reporting periods starting January 1, 2002. (Deloitte IAS Plus website)
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations was issued in March 2004 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 6: Exploration for and Evaluation of Mineral Assets was issued in December 2004 and is applicable for annual periods beginning on or after January 1, 2006. (Deloitte IAS Plus website)
IFRS 7: Financial Instruments: Disclosures (effective 2007) |
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There is no publicly available information as to Israel's compliance with this principle.
IFRS 7: Financial Instruments: Disclosures was issued on August 18, 2005 and is applicable for annual periods beginning on or after January 1, 2007. (Deloitte IAS Plus website)
IAS 1: Presentation of Financial Statements (effective 2007) |
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There is no publicly available information as to Israel's compliance with this principle.
The effective date of IAS 1 (rev. 2003): Presentation of Financial Statements was January 1, 2005. However, the IASB further revised IAS 1: Presentation of Financial Statements in August 2005 as a part of its project to develop IFRS 7 Financial Instruments: Disclosures. The IASB concluded to amend IAS 1 to add requirements for disclosures of: (1) the entity's objectives, policies and processes for managing capital; (2) quantitative data about what the entity regards as capital; (3) whether the entity has complied with any capital requirements; and (4) if it has not complied, the consequences of such non-compliance. These disclosure requirements apply to all entities, effective for annual periods beginning on or after 1 January 2007, with earlier application encouraged. (Deloitte IAS Plus website)
IAS 2: Inventories (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The IASB revised IAS 2: Inventories in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 7: Cash Flow Statements (effective 1994) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 7: Cash Flow Statements (revised 1992) is applicable for periods beginning on or after January 1, 1994. (Deloitte IAS Plus website)
IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The IASB revised IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 10: Events after the Reporting Period (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The revised IAS 10 Events After the Balance Sheet Date was issued by IASB in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 11: Construction Contracts (effective 1995) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 11: Construction Contracts is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)
IAS 12: Income Taxes (effective 2001) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 12: Income Taxes is applicable for periods beginning on or after January 1, 1998. (Deloitte IAS Plus website)
IAS 14: Segment Reporting (effective 1998) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 14 Segment Reporting is applicable for periods beginning on or after July 1, 1998. (Deloitte IAS Plus website)
IAS 16: Property, Plant and Equipment (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) revised IAS 16 Property, Plant and Equipment Sheet Date in December 2003. The revised standard is effective for the periods commencing on January 1, 2005. (Deloitte IAS Plus website)
IAS 17: Leases (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) revised IAS 17: Leases in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 18: Revenue (effective 1995) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 18: Revenue is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)
IAS 19: Employee Benefits (effective 2006) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 19: Employee Benefits was issued in 1998 and is applicable for periods beginning on or after January 1, 1999. The IASB revised IAS 19: Employee Benefits in December 2004 to take into account options to recognize actuarial gains and losses in full, outside profit or loss, in a statement of changes in equity. The amendment is applicable for periods beginning on or after January 1, 2006. (Deloitte IAS Plus website)
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance is applicable for periods beginning on or after January 1, 1984. (Deloitte IAS Plus website)
IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The revised IAS 21 The Effects of Changes in Foreign Exchange Rates was issued by IASB in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 23: Borrowing Costs (effective 1995) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 23: Borrowing Costs is applicable for periods beginning on or after January 1, 1995. (Deloitte IAS Plus website)
IAS 24: Related Party Disclosures (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The IASB revised IAS 24: Related Party Disclosures in December 2003. It is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 26 Accounting and Reporting by Retirement Benefit Plans is applicable for periods beginning on or after January 1, 1988. (Deloitte IAS Plus website)
IAS 27: Consolidated and Separate Financial Statements (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) revised IAS 27: Consolidated and Separate Financial Statements in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 28: Investments in Associates (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) revised IAS 28: Investment in Associates in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 29: Financial Reporting in Hyperinflationary Economies is applicable for periods beginning on or after January 1, 1990. (Deloitte IAS Plus website)
IAS 31: Interests in Joint Ventures (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The IASB revised IAS 31: Interests in Joint Ventures in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 32: Financial Instruments: Disclosure and Presentation was issued in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 33: Earnings per Share (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) revised IAS 33: Earnings per Share in December 2003. The revised standard is effective for periods commencing January 1, 2005. (Deloitte IAS Plus website)
IAS 34: Interim Financial Reporting (effective 1999) |
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In August 2003, the Israeli Accounting Standards Board (IsASB) issued Standard No. 14, Interim Financial Reporting, which is based on International Accounting Standard (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. (Deloitte IAS Plus website)
IAS 34 Interim Financial Reporting is applicable for periods beginning on or after January 1, 1999. (Deloitte IAS Plus website)
IAS 36: Impairment of Assets (effective 2004) |
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There is no publicly available information as to Israel's compliance with this principle.
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 International Accounting Standard (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. (Deloitte IAS Plus website)
The revised IAS 36 Impairment of Assets was issued by IASB in March 2004. It is applied to goodwill and intangible assets acquired in business combinations after March 31, 2004, and to all other assets for annual periods beginning on or after March 31, 2004. (Deloitte IAS Plus website)
IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999) |
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There is no publicly available information as to Israel's compliance with this principle.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets was issued in July 1998 and is applicable for periods beginning on or after July 1, 1999. (Deloitte IAS Plus website)
IAS 38: Intangible Assets (effective 2004) |
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There is no publicly available information as to Israel's compliance with this principle.
The International Accounting Standards Board (IASB) issued the revised International Accounting Standard (IAS) 38 Intangible Assets in March 2004. The revised standard is applied to the accounting for intangible assets acquired in business combinations after March 31, 2004, and to all other intangible assets for annual periods beginning on or after March 31, 2004. (Deloitte IAS Plus website)
IAS 39: Financial Instruments: Recognition and Measurement (effective 2006) |
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There is no publicly available information as to Israel's compliance with this principle.
The revised International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement was issued in December 2003 and is applicable for annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 40: Investment Property (effective 2005) |
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There is no publicly available information as to Israel's compliance with this principle.
The revised IAS 40 Investment Property was issued in December 2003 and is applicable to annual periods beginning on or after January 1, 2005. (Deloitte IAS Plus website)
IAS 41: Agriculture (effective 2003) |
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There is no publicly available information as to Israel's compliance with this principle.
International Accounting Standard (IAS) 41 Agriculture is applicable for periods beginning on or after January 1, 2003. (Deloitte IAS Plus website)
Israel