RETALIX LTD.

RETALIX LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES (continued):
2) In May 2005, the FASB issued Statement No. 154,’Accounting Changes and Error Corrections” (“FAS 154”), a
replacement of APB No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting Changes in
Interim Financial Statements”. FAS 154 provides guidance on the accounting for and reporting of accounting changes
and error corrections. APB No. 20 previously required that most voluntary changes in accounting principles be
recognized by including in net income for the period of the change, the cumulative effect of changing to the new
accounting principle. FAS 154 requires retroactive application to prior periods’ financial statements of a voluntary
change in accounting principles unless it is impracticable. FAS 154 is effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The Company does not expect that the adoption of FAS
154 will have a material impact on its financial position or results of operations.
3) In November 2004, the FASB issued Statement No. 151, “Inventory Costs, an Amendment of ARB No. 43, Chapter
4.” (“FAS 151”). FAS 151 amends Accounting Research Bulletin (“ARB”) No. 43, Chapter 4, to clarify that abnormal
amounts of idle facility expense, freight handling costs and wasted materials (spoilage) should be recognized as currentperiod
charges. In addition, FAS 151 requires that allocation of fixed production overheads to the costs of conversion be
based on normal capacity of the production facilities. FAS 151 is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005. The Company does not expect that the adoption of FAS 151 will have a material
effect on its financial position or results of operations.
4) In November 2005, the FASB issued FASB Staff Position (“FSP”) 115-1, “The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments”. The FSP addresses the determination as to when an investment
is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss.
The FSP also includes accounting considerations subsequent to the recognition of other than-temporary impairment and
requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments.
The guidance in this FSP amends FASB Statement No. 115, “Accounting for Certain Investments in Debt and
Equity” (“FAS 115”). The FSP replaces the impairment evaluation guidance of EITF Issue No. 03-1, “The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments,” with references to the existing otherthan-temporary
impairment guidance. The FSP clarifies that an investor should recognize an impairment loss no later
than when the impairment is deemed other-than-temporary, even if a decision to sell an impaired security has not been
made. The guidance in this FSP is to be applied to reporting periods beginning after December 15, 2005.
v. Reclassification:
As of December 31, 2005, adoption of FSP 115-1 will not have a material impact on the Company’s financial position or
results of operations.
Certain comparative figures have been reclassified to conform to the current year presentation.
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