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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
BDO Israel DOING BUSINESS IN ISRAEL both internal research and development costs are recognized as an expense, when incurred. Special capitalization criteria, different from those stipulated by Israeli GAAP, are applied to software developed for internal use and that developed for sale. It should be emphasized that several issues exist in respect of which there is no mandated accounting policy. Therefore, in practice, the accounting policy of certain Israeli companies conforms partly to that of United States practices. This includes, inter alia, debt restructuring and measurement of financial instruments. 71
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PREFACE This publication has been p
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7. INVESTMENT INCENTIVES AND TRADE
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8 THE ISRAELI ECONOMY IN 2010 The I
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1.2.4. Fiscal Developments 10 THE I
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12 THE ISRAELI ECONOMY IN 2010 1.2.
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14 THE ISRAELI ECONOMY IN 2010 Comp
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16 ISRAEL - GENERAL OVERVIEW Israel
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2.4. ISRAEL’S CURRENCY 18 ISRAEL
Page 22 and 23: Legal holidays in 2010 and 2011 are
Page 24 and 25: 22 OVERVIEW OF ISRAEL’S HIGH-TECH
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Page 34 and 35: 32 BUSINESS STRUCTURE The Companies
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Page 38 and 39: 36 BUSINESS STRUCTURE recommendatio
Page 40 and 41: 38 BUSINESS STRUCTURE TASE regulati
Page 42 and 43: 40 BUSINESS STRUCTURE ♦ Non-profi
Page 44 and 45: 4.2.2. Prerequisites 42 BUSINESS ST
Page 46 and 47: 44 BUSINESS STRUCTURE As mentioned
Page 48 and 49: 46 BUSINESS STRUCTURE 4.3. INSURANC
Page 50 and 51: 5.1.2. Distribution of Employees 48
Page 52 and 53: 50 BUSINESS ENVIRONMENT As of Janua
Page 54 and 55: 5.2. ANTITRUST LAW 52 BUSINESS ENVI
Page 56 and 57: 5.3. INTERNATIONAL TRADE 54 BUSINES
Page 58 and 59: 5.4. TRADE AGREEMENTS 56 BUSINESS E
Page 60 and 61: 5.5. PROPRIETARY RIGHTS 58 BUSINESS
Page 62 and 63: 60 ACCOUNTING AND AUDITING PERSPECT
Page 76 and 77: 74 INVESTMENT INCENTIVES AND TRADE
Page 108 and 109: 106 TAXATION Under the recent tax r
Page 110 and 111: 108 TAXATION (d) More than 50% of o
Page 112 and 113: 110 TAXATION 8.2.2.6. Dividends Rec
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120 TAXATION 8.2.4.3. Tax exemption
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8.3.4. Sale of Stocks 122 TAXATION
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124 TAXATION 8.3.7.3. Setting-off C
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126 TAXATION ♦ According to the r
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8.5. TAXATION OF TRUSTS 128 TAXATIO
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8.6.1. Definitions: 130 ♦ Israeli
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132 5) Certain services rendered to
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8.8.6. Real Estate Companies 134 TA
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8.10. TAX TREATIES 136 TAXATION As
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138 Dividends % Interest % TAXATION
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140 FOREIGN EXCHANGE CONTROL AND PR
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10.3. ISRAEL LAND ADMINISTRATION OF
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11.2. KEY FIGURES FOR DECEMBER 31,
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Example A NIS Example B NIS APPENDI
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APPENDIX 2 Industrial enterprises m
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Ministry of Justice 29 Tsalch Adin
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Israel - US Binational Industrial R
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BRAZIL Embassy of Israel S.E.S Av.
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ECUADOR Embassy of Israel Av. La Co
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IVORY COAST (COTE D’IVOIRE) Embas
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PANAMA Embassy of Israel Edificio P
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THAILAND Embassy of Israel Ocean To
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REPUBLIC OF THE FIJI ISLANDS Embass
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