RETALIX LTD.

RETALIX LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):
Assets and liabilities are translated at year end exchange rates, while operating results items are translated at average
exchange rates during the year. Differences resulting from translation are presented in shareholders equity under
accumulated other comprehensive income. The financial statements of the associated company are included in the
financial statements of the Company in accordance with the equity method, based on translation into dollars in
accordance with FAS 52: the resulting translation adjustments are presented under shareholders’ equity- accumulated
other comprehensive income.
b. Principles of consolidation:
1) The consolidated financial statements include the accounts of the Company and its subsidiaries.
2) Intercompany balances and transactions have been eliminated in consolidation.
3) As for goodwill and other intangible assets arising on business combinations, see h. below.
4) The Company evaluates its interests in other entities to determine whether any entity is a variable interest entity (“VIE”)
within the meaning of FIN 46(R) “Consolidation of Variable Interest Entities”. If the Company concludes that an entity
is a variable interest entity, the Company evaluates its interest in such entity to determine whether the Company is the
primary beneficiary of the entity. If the Company is the primary beneficiary of a variable interest entity, the Company
consolidates such entity and reflects the interest of other beneficiaries of that entity as a minority interest. If the
Company concludes that an entity is a variable interest entity and that the Company is not the primary beneficiary, the
Company does not consolidate the entity. The Company’s consolidated financial statements include VIE for which the
Company is the primary beneficiary and of which it holds majority of voting interest.
c. Cash equivalents:
The Group considers all highly liquid investments, which include short-term bank deposits with an original maturity date of
three months or less that are not restricted as to withdrawal or use, to be cash equivalents.
d. Marketable securities:
The Company accounts for investments in marketable securities in accordance with FASB Statement No. 115, “Accounting for
Certain Investments in Debt and Equity Securities”.
Investments in marketable bonds are classified as held to maturity because the Company has the positive intent and ability to
hold to maturity and are stated at amortized cost with the addition of computed interest accrued to balance sheet date (such
interest represents the computed yield on cost from acquisition to maturity). Interest and amortization of premium discount for
debt securities are carried to financial income or expenses.
Investments in other marketable securities that are classified as “trading securities” are stated at market value. The changes in
market value of these securities are carried to financial income or expenses.
e. Investment in an associated company:
This investment is accounted for by the equity method and included among other non-current assets.
f. Inventories:
Inventories that include purchased products value hardware are included in finished goods and are valued at the lower of cost or
market. Cost is determined on a “first-in, first-out” basis.
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