preface

70
ACCOUNTING AND AUDITING PERSPECTIVES
♦ Business combinations and transactions with non-controlling interest
holders. Israeli GAAP is similar to U.S GAAP, prior to the changes adopted
as of January 1, 2009.
♦ Impairment of assets - The Israel Accounting Standard Board published, in
February 2003, Accounting Standard No. 15, based on the international
practice of impairment of assets. The American practice concerning
impairment is stated in FAS 144. Differences exist between FAS 144 and
Accounting Standard No. 15, as to when and how to consider the need for
impairment, and also in determining the useful life of an asset. In addition,
Israeli GAAP, goodwill and indefinite-lived intangible assets are reviewed,
at least annually, in order to establish impairment to the cash-generating
units (CGU) or groups of CGUs, as applicable. US GAAP is similar to
Israeli GAAP, although the level and the impairment test itself are different.
♦ Derivative instruments - Derivative instruments are recognized and
measured in Israel in accordance with FAS 52 and FAS 80. (FAS 52 and
FAS 80 were U.S. GAAP before the effective date of FAS 133). However,
the Israel Banks Commissioner requested Israeli banks to adopt FAS 133
from the first quarter of 2003.
♦ Compound financial instruments - Under Israeli GAAP, convertible debt
(a fixed number of shares for a fixed amount of cash) is accounted for on a
split basis, while proceeds allocated between equity and debt. In U.S.
GAAP conventional convertible debt is usually recognized entirely as a
liability, unless a beneficial conversion feature exists.
♦ Embedded derivatives - Under Israeli GAAP, no bifurcation of embedded
derivatives is required, while under FAS 133, embedded derivatives are
bifurcated in some cases from their host contract.
♦ R&D cost - Under Israeli GAAP, an intangible asset is recognized
separately from goodwill if it represents contractual or legal rights, or is
capable of being separated, divided, sold, transferred, licensed, rented or
exchanged. Acquired in-process research and development (R&D) is
recognized as a separate intangible asset if it meets the definition of an
intangible asset and its fair value can be reliably measured. Non-identifiable
intangible assets are subsumed within goodwill. Similarly, US GAAP
requires acquired in-process R&D to be valued at fair value. However, the
acquired in-process R&D is expensed immediately, unless it offers
alternative future use. In addition, Israeli GAAP requires internal
development costs to be capitalized, if specific criteria are met, and these
are applied to all internally developed intangible assets. Under U.S. GAAP,
BDO Israel