Hong Kong or US GAAP: Israel’s Financial Reporting Requirements
Israel has adopted International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), in an effort to harmonize financial reporting standards with international norms. This move is mandatory for foreign issuers whose securities trade in Israel’s public market and meet specific conditions.
Foreign Issuers
Foreign issuers that meet the following conditions are allowed to use IFRS accounting standards:
- More than 50% of their revenue comes from outside Israel, and
- Control is not held by Israeli residents
These companies must provide a reconciliation to IFRS accounting standards if their financial statements do not comply with international norms.
Domestic Companies
Domestic companies in Israel are required to use IFRS accounting standards as issued by the IASB. New and amended standards are adopted as soon as they are issued by the IASB.
Auditor’s Report
The auditor’s report and basis of presentation footnote must state that financial statements have been prepared in conformity with IFRS accounting standards. The report includes an assertion of compliance with IFRS standards and disclosure requirements under Israel’s Securities Law Regulations (Annual Financial Statements), 2010.
No Dual Reporting
Israel does not permit dual reporting, which means companies cannot present their financial statements in accordance with both IFRS and US GAAP or other domestic accounting standards.
Incorporation into Law
IFRS accounting standards are incorporated into Israel’s law through the Securities Regulations (Annual Financial Statements), 2010. New or amended standards are automatically adopted without the need for a specific incorporation or endorsement process.
Optional Adoption of IFRS for SMEs
Israel has adopted the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) as an optional accounting framework for small and medium-sized entities (SMEs). All SMEs are permitted to use the IFRS for SMEs, but there is no requirement for them to do so.
Translation
IFRS accounting standards are translated into Hebrew by the Israel Accounting Standards Board. The translation process ensures ongoing updates to the latest standards.
Conclusion
Israel’s adoption of IFRS accounting standards demonstrates its commitment to harmonizing financial reporting with international norms. Foreign issuers and domestic companies must comply with IFRS standards, while SMEs have the option to use the IFRS for SMEs framework. The jurisdiction’s translation process ensures that local language versions of IFRS standards are available to stakeholders.