Securities Regulations (Annual Financial Statements ... · Securities Regulations (Annual Financial Statements), 20101 By virtue of my authority under section 36 of the Securities

Securities Regulations (Annual and Financial Statements), 2010

Original Hebrew version provided by "Dinim Veod" - Legal database – Halachot Publishing

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The following translation is intended solely for the convenience of the reader. This translation has no legal

status and although every effort has been made to ensure its accuracy, the ISA does not assume any

responsibility whatsoever as to its accuracy and is not bound by its contents. Only the original Hebrew text

is binding and reader is advised to consult the authoritative Hebrew text in all matters which may affect

them.

Securities Regulations (Annual Financial Statements), 20101

By virtue of my authority under section 36 of the Securities Law, 5728-1968, on the

recommendation of the ISA and with the approval of the Knesset Finance Committee, I

hereby enact the following regulations:

Chapter A:

General Provisions

Definitions:

[Amended: 2006(2)]

1. In these regulations, -

‗Notes,’ ‘owner of the parent ,’ ‘a statement of financial position,’ ‘a statement of

comprehensive income’ ‘a statement of changes in equity,’ ‘a statement of cash flows,’

‘consolidated statements,’ ‘comprehensive income,’ ‘earnings per share,’

‘corporation’s investment in an associate,’ ‘contingent liabilities,’ ‘non controlling

interests,’ ‘proportionately consolidated company,’ ‘finance lease,’ ‘operating lease,’

‘retained earnings,’ ‘date of transition to IFRS,’ ‘grant date,’ ‘operating cycle’ ‘non-

current assets,’ ‘financial assets,’ ‘function based expenses classification,’ ‘nature

based expenses classification,’ ‘gains or losses relating to discontinued operation ,’

‘profit or loss attributable to owners of the parent,’ ‘equity method,’ and ‘joint control,’

shall have the meanings given them in the generally accepted accounting principles;

‗Principal shareholder’ in a corporation - according to the meaning thereof in paragraph

(1) of the definition of ‗principal shareholder‘ in a corporation, in section 1 of the Law;

‘Financial statements’ or ‘reports’ – a full set of financial statements as defined in the

generally accepted accounting principles;

‗Auditor‘ — one of the following:

(1) An auditor;

(2) A party who is licensed in the country in which the party operates to audit

financial statements that are of the type of financial statements that are

produced by the foreign issuer;

‗Continuing contract‘ – a contract dealing with compensation, rental payments, etc.

1 Kovetz HaTakanot (Collection of Regulations) 6861, 5770 (25 January 2010), p. 662 (Draft Regulations

in Kovetz HaTakanot (Collection of Regulations) 6865, 2010.



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‗Company’ – including a partnership, joint venture, cooperative society or any other

corporation;

‗associateAssociate‘ – as defined in the generally accepted accounting principles, and a

company in which the corporation holds joint control and which is treated in accordance

with the equity method;

‗Consolidated company‘ – a company whose reports are consolidated with the

corporation‘s reports, except for a company which is proportionately consolidated;

‗Held company‘ – a consolidated company, a proportionately consolidated company or

an associate;

‗Credit card company‘ – an auxiliary company that issues a debit card or which settles

payments that were made through it; for this purpose, the terms ―issues‖ and ―debit card‖

shall have the meanings and definitions given to them in the Debit Card Law - 1986, as

relevant; and the term ―auxiliary company‖ will have the term given to it in the ―Banking

Law (Licensing) – 1981;

‗Generally accepted accounting principles‘ – international financial reporting standards;

‗United States generally accepted accounting principles’ ("US GAAP") – the generally

accepted accounting principles in the United States as they may be from time to time,

with respect to companies listed for trading on stock exchanges in the United States,

including the rules and standards published by the Financial Accounting Standards Board

(FASB), and the rules adopted by that FASB;

‗Insurer’ - within the meaning thereof in the Supervision of Insurance Business Law -

1981;

‘Foreign issuer’ – an issuer which was incorporated outside of Israel and regarding

which the following conditions were met at the time of its initial public offering:

(1) More than 50% of its revenue is not received in Israel;

(2) Control of the issuer is not held by permanent residents of Israel; for this

purpose, the holding or purchase of securities together with other shall

exclude the holding thereof together with a permanent resident of Israel;

‗Supervisor of Banks‘ – as defined in the Banking Ordinance -1941;

‘Accountant’ – including those who have been authorized to work as accountants outside

of Israel;

‗Corporation‘ – the corporation that prepared the reports, other than a joint investment

trust;



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‗Date of the approval of the reports’ – the date on which the corporation‘s board of

directors approved the reports;

‗Compensation‘ – as defined in regulation 21 of the Periodic and Immediate Reports

Regulations;

‗Periodic and Immediate Reports Regulations‘ – the Securities Regulations (Periodic

and Immediate Reports) -1970;

‗American auditing standards‘ – the accepted auditing standards in the United States

with respect to companies listed for trading on stock exchanges in the United States,

including the auditing standards published by the American Auditing Standards Board of

the American Institute of Certified Public Accountants (AICPA);

‗Foreign auditing standards‘ – accepted auditing standards that are not Israeli accepted

auditing standards and are not international auditing standards;

‗International Financial Reporting Standards‘ ("IFRS") – Standards and interpretations

published by the International Accounting Standards Board (IASB);

‗International auditing standards‘ – the international auditing standards published by

the International Federation of Accountants;

Application of the regulations

2. The provisions of these regulations shall apply to the preparation of a corporation‘s

financial statements, excluding:

(1) The financial statements of a banking corporation or a credit card company that

are prepared in accordance with the directives and guidelines of the Supervisor of

Banks, and excluding information in the financial statements of a corporation that

has consolidated or proportionately consolidated a banking corporation or a credit

card company, or information in the financial statements of a corporation for

which the banking corporation or credit card company is an associate, to the

extent such information relates to the banking corporation or credit card company;

(2) The financial statements of an insurer which are prepared in accordance with the

Insurance Business Control Regulations (Particulars of Report) -1998, and

excluding information in the financial statements of a corporation that has

consolidated or proportionately consolidated an insurer, or information in the

financial statements of a corporation for which an insurer is an associate, to the

extent such information relates to the insurer;

(3) Information in the financial statements of a corporation which has

consolidated or proportionately consolidated a corporation which is subject to

the provisions of Chapter 5C of the Law or information in the financial



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statements of a corporation for which such a corporation is an associate, to the

extent such information relates to such corporation and is not required to be

disclosed pursuant to the foreign law that applies to such corporation.

Rules for preparing the reports

3. (a) The reports will be prepared according to the generally accepted accounting

principles and will present, accurately and faithfully, the corporation‘s financial

condition, its operations and its cash flows, and the changes in its business

condition and in its equity in the reported years.

(b) The required disclosure will be prepared according to the generally accepted

accounting principles and according to these regulations; the details required

pursuant to these regulations will be provided in the notes, unless, under the

circumstances, they are not material.

(c) The corporation shall include, in its financial statements, an express and

unqualified certification regarding full compliance with the International

Financial Reporting Standards; the certification will also indicate that the

financial statements including the additional disclosure required pursuant to these

regulations.

Non-conformity between the provisions of the regulations and the generally

accepted accounting principles

4. If the Chairman of the ISA or whoever has been authorized for such purpose in

writing is persuaded that there is a provision in these regulations that makes it

impossible to implement the generally accepted accounting principles or does not

enable that which is permitted pursuant to such regarding the submission of a

particular report, the Chairman will direct that such provision will not apply to the

submission of that particular report.

Financial statements of a foreign issuer

5. (a) Notwithstanding the provisions of regulation 3, the financial statements of a

foreign issuer may be prepared in accordance with either the generally accepted

accounting principles, the United States generally accepted accounting principles

or the International Financial Reporting Standards as adopted by the European

Union in the framework of Regulation (EC) of the European Parliament and the

Council 1606/2002.

(b) The financial statements of a foreign issuer may be audited pursuant to the

international auditing standards or pursuant to the American auditing standards,

in accordance with the type of rules or standards according to which they were

prepared, in accordance with sub-regulation (a).



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(c) Regarding the financial statements of a foreign issuer that are prepared as

described in sub-regulation (a) and which are audited as described in sub-

regulation (b), the following provisions shall apply:

(1) If a foreign issuer has prepared its financial statements in accordance with the

United States generally accepted accounting principles, the reports shall

include a note regarding adjustments to the generally accepted accounting

principles; for this purpose, ―adjustment‖ shall mean – adjustment of the

profit or loss for the period and of the amount of the comprehensive income

for the period which is attributed to the owner of the parent, adjustment of the

profit or loss for the period which is attributed to the non-controlling

interests, and of the amount of the comprehensive income for the period

which is attributed to the non-controlling interests and of the amount of the

equity attributed to the owner of the parent and of the amount of the equity

attributed to the non-controlling interests;

(2) The reports may be written in a language other than Hebrew, provided that

they are accompanied by a translation into Hebrew and a certification from

the translator concerning the accuracy of the translation and the translator‘s

consent to having the translation and the certification included in the reports;

(3) If the reports are presented in a currency other than those listed in the

Schedule, the reports will be presented in terms of shekel values, and the

translation of the financial statements into shekel values shall be prepared in

accordance with the accounting rules according to which the said reports

were prepared, as described in sub-regulation (a); if a translation into Hebrew

has been attached to such reports pursuant to paragraph (2), the translation

shall present the shekel values;

(4) The auditor will, in his opinion, indicate the accounting rules according to

which the reports were prepared and the auditing standards according to

which they were audited;

(5) The auditor‘s opinion may be prepared in a language other than Hebrew,

provided that it is accompanied by a translation into Hebrew and a

certification from the translator concerning the accuracy of the translation

and the translator‘s consent to having the translation and the certification

included in the reports;

(6) In addition, the auditor or accountant shall provide his opinion as to whether

the financial statements include the additional disclosure requirements

established in these regulations.

Currency in which the reports are presented

6. If a corporation‘s reports are not presented in a currency that is one of those listed in

the Schedule, the corporation shall also attach to its reports a translation into shekel



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values of the amounts appearing in the reports, which has been prepared in

accordance with the generally accepted accounting principles.

Comparative reports

7. (a) A parallel amount that was reported in the statement of financial position for the

previous reporting year will appear alongside each amount in the statement of

financial position.

(b) A parallel amount from each of the two preceding fiscal years will appear

alongside each amount in the statement of comprehensive income - whether such

amount is presented in a single statement or in two statements that separately

present the components of the profit or loss in one statement and the other

components of comprehensive income in a different statement - in the statement

of changes in equity and in the statement of cash flows.

(c) Notwithstanding the provisions of sub-regulation (b), a corporation whose

securities have been delisted from trading on a foreign stock exchange during the

course of the reporting year – as described in section 35AA of the Law – may

establish that the transition date to IFRS was the beginning of the reporting year

preceding the reporting year during which its securities were delisted from

trading on the foreign stock exchange, and may present in its financial statements

for the reporting year, alongside each amount in each of the statements listed in

sub-regulation (b), the parallel amounts for only the preceding reporting year; if

such a corporation did not publish financial statements for the last reporting year

throughout which its securities were traded on a foreign stock exchange in

accordance with section 35EE of the Law, the provisions of this sub-regulation

shall not apply and the provisions of sub-regulation (b) shall apply.

(d) The statements shall indicate any amount that has been re-stated or re-classified.

Period of the operating cycle

8. The corporation‘s operating turnover period shall be indicated.

Indication of amounts

9. Amounts shall be included for any detail that can be quantified, including amounts

that can be quantified through reasonable estimates.

Additional information

10. In addition to all the details required pursuant to the generally accepted accounting

principles and pursuant to these regulations, the reports shall present any detail,

information or clarification in the absence of which the reports will not be in full

compliance with the requirements of regulation 3(a).



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Signatures and date

11. Alongside the signatures of the reports‘ signatories, there will also be an indication of

their names and of their positions at the corporation and an indication of the date of

the approval of the reports; if the board of directors have authorized a director to sign

in the name of the chairman of the board of directors, the CEO or the most senior

corporate officer dealing with finance, as provided in regulation 9(e) of the Periodic

and Immediate Reports Regulations, the notes shall indicate the matter of such

authorization and the reasons therefor.

Chapter B: Details regarding the statement of the corporation’s financial

position

Presentation format for the statement of financial position

12. If the statement of the corporation‘s financial condition is not presented on the basis

of a distinction between current assets and liabilities and non-current assets and

liabilities, as defined in the generally accepted accounting principles, the presentation

format that was used shall be indicated, along with the reasons for such presentation.

Customer receivables, debtors and current credit balances

13. (a) Customer receivables shall be described according to the following two groups:

(1) Open debts;

(2) Checks receivable;

(b) The amounts of the provisions for doubtful debts shall be specified; the amounts

of the provisions that have been deducted from the customer receivable balances

shall be indicated separately.

Financial assets

14. (a) For each of the groups of financial assets that are required to be disclosed

pursuant to the generally accepted accounting principles, the types of substantial

investments in such group and the amount thereof shall be specified; for the

purpose of this regulation, the term ―financial asset‖ shall mean a financial asset

included in International Accounting Standard 39, or in any other standard that

may replace it.

(b) The expected dates for the realization of any investment amounts will be

disclosed, according to each type described in sub-regulation (a).

(c) The assets will be classified and specified in groups according to currencies and

according to the form of linkage, and at least according to –

(1) Assets denominated in a foreign currency or which are linked to a foreign

currency, with each significant currency being specified separately;

unlinked shekel amounts and shekel amounts that are linked to an index



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will be presented separately, with a separate presentation of each

significant type of index;

(2) Assets that are linked to a different base, with each significant linkage base

being specified separately;

(d) If amounts that were invested in a company that is not a held company (in this

sub-regulation – an invested company), combined with the amounts of any

guarantees given for its liabilities by the corporation or by corporations it

controls or which are under its joint control, exceed five percent of all the assets

in the statement of the corporation‘s financial condition, the following details

will be presented:

(1) The name of the company in which the investment was made;

(2) The amount of the investment in the company as of the date of the of the

statement of financial position;

(3) Details of the guarantees given for the company‘s liabilities;

(4) The income from dividends and other income from the company.

Real property rights

15. If the corporation has rights in real property, the following provisions will apply:

(1) The rights will be specified, with a distinction being made between ownership

rights and leasehold rights;

(2) Leasehold rights will be specified, with a distinction being made between finance

leases and operating leases, with an indication of the remaining lease period, and

with a distinction being made between capitalized leases and non-capitalized

leases.

(3) If any real property rights in Israel have not been registered in the corporation‘s

name or in the name of its subsidiary at the Land Title Registry, the reason for

such non-registration shall be indicated.

(4) If any real property rights outside of Israel have not been registered in the

corporation‘s name or in the name of its subsidiary at the registry which is

maintained by law in the country in which such real property is located, the reason

for such non-registration shall be indicated.

Type of indexation for liabilities

16. A corporation‘s liabilities will be categorized and specified in groups, according to

the type of currency or the type of indexation, and at the least, according to –

(1) Non-linked shekel liabilities;

(2) Index-linked shekel liabilities, with each type of significant index being specified

separately;

(3) Foreign currency or foreign currency-linked liabilities, with each type of

significant currency being specified separately;



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(4) Liabilities that are linked to another base, with each type of significant linkage

base being specified separately.

Conditions on which liabilities are contingent

17. (a) If a material liability of the corporation or of its held company is contingent on

the fulfillment of any conditions whatsoever, such conditions will be specified

and an indication will be provided as to whether such conditions have been met

as of the date of the statement of financial position, with a distinction being made

between the corporation‘s liabilities and those of its held companies.

(b) If, during the reporting year, circumstances have arisen which could accelerate

the payment of the liabilities, such circumstances and the amount of such

liabilities will be specified, with a distinction being made between the

corporation‘s liabilities and those of its held companies.

Contingent liabilities

18. If there is only a slight possibility that there will be a negative cash flow upon

discharge of a contingent liability, but the maximum liability or loss could put into

question the corporation‘s continued operation in its current format, a summary

description of the contingent liability will be provided.

Guarantees

19. (a) The report will include an indication of the total of the amounts that the

corporation, or that a consolidated company or a proportionately consolidated

company has guaranteed, including notes that have been assigned, with a

distinction being made between debts of consolidated companies, debts of

proportionately consolidated companies, debts of included companies, debts of

principal shareholders and other debts.

(b) If the corporation, or one of its consolidated companies or a company in which it

holds joint control has given a guarantee which is unlimited in amount, or a

guarantee the exercise of which could put into question the corporation‘s

continued operation in its current format - other than a guarantee given to a

consolidated company or to a proportionately consolidated company - the report

shall provide the following details, with a distinction being made between

guarantees given by the corporation and guarantees given by a consolidated

company or by companies of whom it has joint control:

(1) The name of the guaranteed party;

(2) The name of the creditor;

(3) The scope of the guarantee;

(4) The total of all the liabilities guaranteed as of the date of the statement of

financial position;

(5) The security received with respect to such guarantees;

(6) The corporation‘s expenses and income with respect to such guarantees.



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(c) The corporation will attach to its reports the audited financial statements of any

companies that are the beneficiaries of guarantees such as are described in sub-

regulation (b), if the guarantee given is such that its exercise could put into

question the corporation‘s continued operation in its current format, or if the

guarantee is one which is unlimited in amount; the chairman of the ISA may

exempt a particular corporation from the requirement to attach the reports of a

company that is the beneficiary of such a guarantee, and he may condition the

grant of the exemption on the provision of details regarding such company.

(d) If the corporation has given very substantial guarantees to cover a liability of a

principal shareholder, the details listed in sub-regulations (b)(1) through (6) will

be provided, and the reports of a company that is the beneficiary of such a

guarantee will be attached as described in sub-regulation (c); the chairman of the

ISA may exempt a particular corporation from the requirement to attach the

reports of a company that is the beneficiary of such a guarantee, and he may

condition the grant of the exemption on the provision of details regarding such

company.

(e) The financial statements of a guaranteed company that are required to be

attached pursuant to this regulation shall be prepared in accordance with

generally accepted accounting principles.

(f) Notwithstanding the provisions of sub-regulation (e), the reports of a guaranteed

company may be attached even if they are not prepared in accordance with

generally accepted accounting principles, provided that the following conditions

are met:

(1) The set of accounting rules according to which the guaranteed company‘s

reports were prepared is a comprehensive one;

(2) The content of the information in the guaranteed company‘s reports is similar

in the main part to that which is required pursuant to the generally accepted

accounting principles;

(3) The guaranteed company‘s reports, or the corporation‘s reports, include a

note providing adjustments to the generally accepted accounting principles; if

the guaranteed company has subsidiaries, such data shall be provided with a

distinction being made between the data attributable to the owner of the

parent and the data attributable to non-controlling interests; for this purpose,

the word ―adjustment‖ shall mean – adjustment of the profit or loss for the

period and of the amount of the comprehensive income for the period, and of

the total equity.

(g) The provisions of sub-regulation (c) will not apply to the reports of a guaranteed

company to which section 36 of the Law applies.

(h) In this regulation, ―guarantee‖ shall also include an undertaking to compensate

and the granting of a lien to secure the debt of another.



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Special contractual relationships

20. Details shall be provided regarding contractual relationships that are special because

of one of the following:

(1) The scope of the contractual relationship;

(2) The duration of the contractual relationship;

(3) The importance of the contractual relationship;

(4) The fact that the contractual relationship deviates from what is standard in the

corporation during its ordinary course of business.

Liens and collateral 21. (a) The report will indicate the amounts of the corporation‘s liabilities and the

amounts of other parties‘ liabilities which are secured by liens on any of the

corporation‘s assets or for which the corporation has given any collateral

whatsoever to secure their payment. The report will include a description of the

asset under the lien and the type of the lien or of the collateral given, whichever

is relevant, with a distinction being made between the corporation‘s assets on

which liens have been given or which have been provided as collateral and the

assets of its held companies on which liens have been placed or which have been

provided as collateral.

(b) If a lien or collateral such as is described in sub-regulation (a) has been

exercised, or if during the reporting year or after the date of the reports and

before the date of their approval, proceedings have been initiated for the exercise

of such lien or collateral, the report will disclose such and will specify the

circumstances of the exercise or of the initiation of proceedings, whichever is

relevant, with a distinction being made between liens or collateral given by the

corporation and those given by its held companies.

Chapter C: Details regarding the corporation’s held companies

Investments in held companies

22. (a) The report will provide, in a table format, the following specifics regarding each

directly held company, with a distinction being made between consolidated

companies, companies under joint control and included companies –

(1) The held company‘s name and the country in which it was incorporated;

(2) The corporation‘s rights in the held company, with a distinction (if such a

distinction exists) being made between equity rights and voting rights, and

with a specification of securities held by the corporation that can be

converted into rights to capital and those that can be converted into voting



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rights in the held company, with a distinction being made between securities

that are immediately convertible and those that are not immediately

convertible; the report will also indicate the amounts of loans and guarantees

given by the corporation to each held company;

(3) The size of the investment in the held company, calculated as the net sum -

based on the consolidated reports - of the total of all assets less the total of

liabilities attributable to the owner of the parent company, which present in

the corporation‘s consolidated statement additional financial information for

the held company, including goodwill;

(4) Regarding investments in held companies whose securities are listed for

trading on a stock exchange - the stock exchange on which the held

company‘s securities are listed for trading and the value on the exchange of

the corporation‘s rights in the held company;

(b) If the financial statements of a held company have been consolidated in the

corporation‘s financial statements and the corporation holds less than half of the

company‘s voting rights, the report shall indicate such and the reasons for such

will be specified.

(c) Regarding any company that is an associate as described in regulations 23 and

24, the report will indicate the amount of the goodwill resulting from its

purchase; amounts that have been recognized as declines in the value of the

corporation‘s investment in the associate will also be specified.

Attachment of an associate’s reports 23. (a) The financial statements of an associate for the reporting year will be attached to

the corporation‘s reports, as described in sub-regulations (d) through (i), if one of

the following is true:

(1) The corporation‘s investment in the associate constitutes, in its absolute

value, 20 percent or more of the total assets in the corporation‘s statement

of financial position;

(2) The amount included in the profit or loss due to the corporation‘s

investment in the associate constitutes, in its absolute value, 20 percent or

more of the absolute value of the corporation‘s profit or loss;

(3) The associate has significant importance for the corporation‘s business or

operations in their existing formats, or in the formats planned for them in

the future;

(4) One of the conditions described in paragraphs (1) or (2) was met in the

previous reporting year and it is expected that one of the conditions in

those paragraphs will be met in the coming reporting year as well;



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(5) The company became the corporation‘s associate after the date of the

statement of financial position, and the condition described in paragraph

(3) is true.

(b) Notwithstanding the provisions of sub-regulation (a), the associate‘s financial

statements will not be included in the corporation‘s reports if one of the

following is true:

(1) The associate‘s reports are insignificant in relation to the corporation‘s

reports;

(2) None of the conditions described in sub-regulations (a)(3) through (5) are

met, and neither of the conditions described in sub-regulations (a)(1) or (2)

were met during the previous reporting year, and it is not expected that the

conditions in these paragraphs will be met in the coming reporting year

either;

(3) After the date of the statement of financial position, the company ceased to

be the corporation‘s associate.

(c) The names of all the included companies whose reports have been attached to the

corporation‘s reports will be listed; if the reports of an associate have not been

attached because of the provisions of sub-regulation (b), the name of such

associate shall be given and the reasons for the non-attachment of its reports will

be provided.

(d) The attached reports of an associate will be prepared in accordance with the

generally accepted accounting principles.

(e) With regard to the format for the attachment, notwithstanding the provisions of

sub-regulation (d), the reports of an associate may be attached even if they are

not prepared in accordance with the generally accepted accounting principles,

provided that the conditions specified in regulation 19(f) are met;

(f) If an associate‘s reports are not presented in the same currency as the

corporation‘s reports, the exchange rate between the currency of the associate‘s

reports and the currency of the corporation‘s reports will be specified, as of the

date of the statement of financial position, and any change that has taken place in

such rate during the reporting year will be indicated.

(g) An associate‘s reports shall be audited in accordance with Israeli accepted

auditing standards, or in accordance with the international auditing standards or

in accordance with a set of comprehensive foreign auditing standards.

(h) An auditor‘s report shall be attached to the associate‘s reports. The auditor‘s

report shall indicate the accounting rules in accordance with which the reports

were prepared and the auditing standards in accordance with which the reports

were audited.



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(i) If the associate‘s reports are not written in either Hebrew or English, a translation

of the reports into Hebrew shall be attached, as well as a certification from the

translator concerning the accuracy of the translation and the translator‘s consent

to having the translation and the certification included in the reports. If a

properly signed translation into Hebrew of the report has been attached, there is

no need to attach a copy of the reports in the original language; for this purpose,

the term ―reports‖ refers to the auditor‘s report as well.

(j) The chairman of the ISA may exempt a particular corporation from the

requirement to attach the reports of a company regarding which the conditions of

sub-regulation (a) have been met, and he may condition the grant of the

exemption on the provision of details regarding such company.

(k) The provisions of this regulation will not apply to an associate which is itself a

reporting corporation or which is a corporation to which the provisions of

Chapter 5C of the Law apply.

(l) In this regulation, the term ―profit‖ shall mean the corporation‘s profit or loss

attributable to owners of the parent, less the gains or losses relating to

discontinued operation and less any amounts that were charged to profit or loss

due to the effect of a change in accounting policy, to the extent that the generally

accepted accounting principles provide that the change will be charged to profit

or loss during the reporting period.

Attachment of summarized information regarding included companies

24. (a) The corporation‘s reports shall include summarized information relating to any

associate for each of the periods included in the corporation‘s consolidated

financial statements – such information to be divided into summarized

information about the associate‘s financial condition as described in sub-

regulation (b), and summarized information about the results of its operations as

described in sub-regulation (c) - if any of the following conditions are met:

(1) The corporation‘s investment in the associateassociateconstitutes, in its

absolute value, ten percent or more of total assets in the corporation‘s

statement of financial position;

(2) The amount included in the profit or loss due to the corporation‘s investment

in the associate constitutes, in its absolute value, ten percent or more of the

corporation‘s profit or loss, in its absolute value;

(3) One of the conditions described in paragraphs (1) or (2) was met in the

previous reporting year and it is expected that one of the conditions in those

paragraphs will be met in the coming reporting year as well;

(4) The fulfillment of the conditions specified in this sub-regulation shall be

tested with regard to the corporation‘s consolidated financial statements.



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(b) The summarized information regarding the associate‘s financial condition shall

include all of the following items, as defined in the generally accepted

accounting principles, or as defined in accounting rules that satisfy the provisions

of regulation 19(f); such information may include data that are based on different

classifications and a different presentation, if the associate‘s business

necessitates such and this fact is indicated by the corporation:

(1) Current assets;

(2) Non-current assets;

(3) Current liabilities;

(4) Non-current liabilities;

(5) Equity attributed to the owner of the parent;

(6) Equity attributed to non-controlling interests.

(c) The summarized information regarding the associate‘s results of operations shall

include all of the following items, as defined in the generally accepted

accounting principles, or as defined in accounting rules that satisfy the provisions

of regulation 19(f); such information may include data that are based on different

classifications and a different presentation, if the associate‘s business

necessitates such and this fact is indicated by the corporation:

(1) Income;

(2) Gross profit or loss;

(3) Operating profit or loss;

(4) Profit or loss from continuing activity;

(5) Profit or loss attributable to the owner of the parent;

(6) Profit or loss attributed to non-controlling interests.

(d) Notwithstanding the provisions of sub-regulation (a), a corporation will not be

required to provide summarized information regarding an associate in the

following cases:

(1) The associate‘s reports have been attached to the corporation‘s reports in

accordance with regulation 23(a);

(2) The conditions listed in regulation 23(b)(1) or 23(b)(3) have been met with

regard to the associate.

(e) If the corporation is required to provide summarized information in accordance

with sub-regulation (b), the generally accepted accounting principles will be

applied with regard to the information that is provided.

(f) Notwithstanding the provisions of sub-regulation (e), the corporation may

provide summarized information regarding which the generally accepted

accounting principles have not been applied, provided that the conditions

specified in regulation 19(f) have been met.



16

(g) If the summarized information that is provided is presented in a currency which

is different than the currency used in the corporation‘s reports, the exchange rate

between the currency in which the summarized information is presented and the

currency of the corporation‘s reports shall be specified, as of the date of the

statement of financial position, and any change that has taken place in such rate

during the reporting year shall be indicated.

(h) The provisions of this regulation will not apply to an associate which is itself a

reporting corporation or which is a corporation to which the provisions of

Chapter 5C of the Law apply.

(i) In this regulation, the term ―profit‖ shall have the definition given to it in

regulation 23.

Dividends from held companies 25. The report will indicate the amount of any dividend received, or which the

corporation was entitled to receive during the reporting year. The amounts will be

indicated separately for dividends from consolidated companies, dividends from

proportionately consolidated companies and for dividends from included companies.

Chapter D: Details regarding the corporation’s equity

Dividends and the distribution thereof

26. (a) The report shall indicate the amount of any dividend regarding which there is a

right to receipt, and which has not yet been paid as of the date of the report.

(b) If the distribution of surpluses and funds that can be distributed as cash has been

restricted, the report shall indicate such restriction and the amount thereof.

Allotment of securities to employees 27. If the corporation‘s securities have been allotted to employees or to service

providers, the following details shall be indicated:

(1) The consideration received for such securities or which will be received when

they are exercised, and the manner of its payment;

(2) The corporation‘s share prices on the grant date and on the date of the allotment

of the securities;

(3) The amounts of any loans given by the corporation for the purchase of the

securities and the terms thereof;

(4) If the corporation will bear a tax burden with respect to the allotment of the

securities or to the exercise thereof, the report shall indicate that fact and will

specify the tax amounts borne by the corporation, and if possible the total of all

the tax amounts that are expected to be imposed;

(5) Other terms relating to the allotment.

Securities that are convertible into shares



17

28. If securities that are convertible into shares in the corporation have been allotted or if

another contractual relationship has been entered into, to which the corporation is a

party, and which confers the right to purchase shares in the corporation – including a

contractual relationship that confers a right to purchase securities that are convertible

into shares in the corporation – the report shall specify the terms and amounts

received for such securities or rights, with a separate specification for each such type

of security or of contractual relationship.

Bonus shares

29. If bonus shares have been distributed or if such a distribution has been proposed by

the date of the approval of the reports, the reports will indicate the number of shares

that were distributed or which were the subject of the proposal, their class and their

nominal value; it will not be necessary to provide details regarding a distribution that

was included in a period prior to the reporting year and a planned distribution out of

the profits of a period which is after the date of the statement of financial position.

Chapter E: Details regarding the corporation’s statement of comprehensive income

Statement of comprehensive income 30. The disclosure requirements included in this chapter will apply to a corporation

whether or not it presents the details of income and expenses that were recognized in

the reporting period in a single statement of comprehensive income, or in two reports

which present the profit and loss components separately in one report and the other

comprehensive income components in another report.

Format for the analysis of expenses recognized in the profit and loss calculation

31. The report shall indicate the format for the analysis of expenses recognized in the

profit and loss calculation – i.e., whether it is according to a classification method

based on a nature based expenses classification nature of the expenses or according

to a function based expenses classification. If a classification method based on a

nature based expenses classification has been chosen, the report shall indicate the

reasons for the choice of the analysis method.

Specification of details included in the statement of comprehensive income 32. The report shall specify the main components of each income or expense item

included in the statement of comprehensive income, in accordance with the

circumstances of the case.

Cost of sales, work and services

33. If the corporation has presented a statement of comprehensive income using a

function based expenses classification, the report shall specify the amounts of cost of

sales, work and services, regarding each type of income which is disclosed pursuant

to the generally accepted accounting principles; the cost of sales, work and services

will be specified according to its components, in accordance with the circumstances

of the particular case.



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Sales including credit transactions

34. If the company has sales transactions that include financing transactions as well, the

report will indicate the accounting policy implemented with regard to such as well as

the financing component involved in such transactions; the report will also disclose

the manner in which the corporation separates its income from sales and its income

from financing.

Very long term entrepreneurial projects 35. (a) Regarding very long term entrepreneurial projects, the following details will be

specified:

(1) The total of income recognized during the reporting period and the total

accumulated income as of the end of the reporting period;

(2) The total of costs recognized during the reporting period and the total

accumulated costs as of the end of the reporting period;

(3) The total provision for losses that was recognized during the reporting period

and the total accumulated provisions for losses as of the end of the reporting

period;

(4) The number and total amount of sales contracts entered into during the course

of the reporting period;

(5) Regarding projects the construction of which was not yet completed by the

end of the reporting period – even if the sales thereof have been completed –

or regarding projects the sales of which have not been completed by the end of

the reporting period, even if their construction was completed: the number and

total amount of the sales contracts into which the corporation has entered, in

an accumulated amount as of the end of the reporting period;

(6) If the sales in a substantial project have been completed during the reporting

period or if the construction of a substantial project has been completed during

the reporting period and the sales in such project were completed in the past,

the report shall indicate that fact.

(b) The details specified in sub-regulation(a) will be classified according to their

circumstances, including according to the following classifications:

(1) Residential construction;

(2) Construction for industry and commerce;

(3) Infrastructure projects;

(4) Other – grouped separately according to each substantial type of project.

Shared expenses 36. If others have shared expenses with the corporation, the amounts of such other

participation shall be included within the appropriate items, with such amounts being

indicated separately.



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Sale of non-current assets

37. The report will specify the corporation‘s profits or losses from the sale of substantial

non-current assets, with such amounts being indicated separately for each asset.

Income tax

38. (a) The report will indicate the tax rate to which the corporation is subject.

(b) If the corporation is entitled to a tax exemption or to a tax easement – the details

of such exemptions or easements shall be indicated, including the dates on which

they begin and on which they end; if the exemption or easement is dependent on

the fulfillment of certain conditions – the conditions shall be described and the

report will indicate whether the corporation was in compliance with them through

the date of the approval of the reports.

(c) The report shall indicate the last year for which the corporation and its

subsidiaries have received final tax assessments.

Chapter F: Corporation transactions with principal shareholders and with

controlling shareholders

Corporation’s liability to a principal shareholder

39. Information regarding the corporation‘s and its consolidated companies‘ and its

proportionately consolidated companies‘ liabilities to a principal shareholder in the

corporation will be collected and presented in a note according to the following

details:

(1) Amounts of long-term liabilities before deduction of current maturities, in groups

according to circumstances. Interest rates and linkage bases must be indicated,

along with payment dates and the other main conditions of such liabilities; the

amount of all current maturities will be indicated separately.

(2) Current liabilities, excluding current maturities of long-term liabilities. Interest

rates and linkage bases will be indicated.

Corporation’s investment in a principal shareholder

40. Information on the corporation‘s and its consolidated companies‘ and proportionately

consolidated companies‘ investments in a principal shareholder of the corporation

will be collected and presented in a note according to the following details:

(1) The investments in the principal shareholder or in a party that was a principal

shareholder when the investment was made, and the party‘s loans and debts,

according to the following details:

(a) Investments in shares, in certificates granting rights to purchase shares, in

certificates of indebtedness which can be converted into shares and other



20

investments, other than investments in a held company which is a principal

shareholder in the corporation;

(b) The corporation‘s investments in non-convertible certificates of indebtedness;

(c) Amounts of long-term loans and debts of a principal shareholder, before

deducting current maturities of long term loans and debts and the interest

rates, linkage bases, payment dates and other key conditions; the amounts of

all current maturities will be indicated separately;

(d) Amounts of current loans and debts of a principal shareholder at the date of

the statement of financial position, and the highest balance thereof during the

12 month period preceding the date of the statement of financial position.

(2) If the corporation or its held company has guaranteed the debt of a principal

shareholder or of a party that was a principal shareholder at the time the guarantee

was given, or if the corporation or its held company has given liens on any of its

assets to secure such a debt, the following provisions shall apply:

(a) If the guarantee is limited in amount, the report shall indicate the amount of

the guarantee, the collateral received by the corporation or by its held

companies with respect to such guarantees and the debt balances that the

corporation or its held companies have guaranteed, with a distinction being

made between current debts and non-current debts;

(b) If the guarantee is unlimited, the provisions of regulation 19(b), (c) and (e)

will apply, mutatis mutandi;

(c) If the corporation or its held companies hav given liens on any of their assets

to secure the debt of a principal shareholder, the report will indicate the type

of lien, describe the asset under the lien and indicate the debt balance.

Compensation and benefits to principal shareholders and transactions with such a

shareholder

41. (a) The report will present, in a note, information regarding any compensation or

other benefit given by the corporation or by its consolidated company or

proportionately consolidated company to a principal shareholder of the

corporation, or regarding any transaction with a principal shareholder, according

to the following details:

(1) Compensation and any other benefit given by the corporation or by its

consolidated company or proportionately consolidated company during the

reporting period, with a distinction being made between a principal

shareholder who is employed by the company or on its behalf and a director

who is not so employed, and another principal shareholder who is not so

employed, and the report will indicate the number of people in each of these

categories; regarding each compensation and other benefit, the report will



21

indicate its value, the manner in which its value was determined and the

assumptions used to calculate that value; if compensation or any other benefit

that was given cannot be given a financial value, the terms of such

compensation shall be described.

(2) If there is a contingent liability to pay compensation or to grant any other

benefit for which no provision was made, or if there is a contractual

relationship according to which compensation or any other benefit are to be

given in the future, such liability or contractual relationship and the terms

thereof will be described.

(3) If the corporation will bear a tax burden because of a grant of compensation

or other benefit, the report will indicate such and will specify the tax amounts

that the corporation will bear, and if possible, all the tax amounts that are

expected to be imposed;

(4) The report will indicate any transactions between the corporation, one of its

consolidated companies or one of its proportionately consolidated companies

and a principal shareholder - whether carried out directly or indirectly - with

an indication of the amounts of the transactions, the manner in which prices

were established, the terms of credit and other terms, according to the

circumstances of the case; the report will indicate the impact of the

transactions on the corporation‘s business condition and on the results of its

operations, separately with regard to each transaction;

(5) If there is a contract to carry out a transaction such as is described in sub-

regulation (4) in the future, the details listed in that sub-regulation will be

indicated, mutatis mutandi;

(6) Notwithstanding the provisions of sub-regulations (4) and (5), the

corporation will not be required to provide the details of transactions such as

those described below - excluding an extraordinary transaction as defined in

section 1 of the Companies Law - if one of the following two is true with

regard to the transaction:

(a) The transaction is a negligible one; the corporation must indicate the

types and characteristics of transactions that it has deemed to be

negligible, with a specification of the facts, the reasons and the

explanations for such;

(b) The transaction is not negligible, but the corporation has given a general

description of the transaction, of its characteristics and its scope, and the

scope of all the transactions of this type with the same principal

shareholder.



22

(b) The provisions of this regulation will also apply with regard to a party with

whom a controlling shareholder has a personal interest in contracting; in such

cases, the report will also specify the nature of the said personal interest.

Continuing contracts with different consideration

42. (a) If, during the reporting periods included in the reports, or during a later period

which concludes at the time of the signing of the financial statements, the

corporation entered into a continuing contract with a controlling shareholder,

which constitutes a continuation of an earlier continuing contract but with

different consideration, the report will include a note which will provide the

following details:

(1) The corporation‘s profit or loss attributable to owners of the parent, the

retained earnings and the earnings per share, other items in the statement of

comprehensive income, whether presented in a single report or in two

separate reports which present the profit and loss components separately in

one report and the other comprehensive income components relating to the

matter in another report – for each of the reporting periods included in the

financial statements – which reflect the results of the corporation‘s operations

on the assumption that the terms of the previous continuing contract are

identical to those of the continuing contract (hereinafter: ―the pro-forma

data‖); the pro-forma data will be presented alongside the actual results of

operations, as presented in the financial statements;

(2) The assumptions according to which the pro-forma data were determined.

(b) The provisions of this regulation will also apply with regard to a party with whom

the controlling shareholder has a personal interest in contracting; in such cases,

the report will also specify the nature of the said personal interest.

(c) In this regulation, the term ―controlling shareholder‖ of a corporation shall refer to

a controlling shareholder as defined in the law, including a corporation under the

controlling shareholder‘s control; regarding transactions carried out with a

corporation whose securities have not yet been offered to the public, during the

two years preceding the date of the last financial statements included in the

prospectus pursuant to which the securities were issued to the public – also

including a party that was such a principal shareholder in that corporation during

that same period, excluding a party which is a principal shareholder only by virtue

of being a director or CEO, or a party which is such a principal shareholder in the

general manager in a limited partnership, including a corporation under such

principal shareholder‘s control.



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Chapter G: Miscellaneous provisions

Revocation

43. The Securities Regulations (Preparation of Annual Financial Statements) – 1993

(hereinafter: ―the Report Preparation Regulations‖) are revoked.

Entry into force

44. These regulations shall enter into force with respect to the financial statements that

are required to be submitted as of 31 December 2009 and onwards.

Transitional provisions

45. Notwithstanding the provisions of regulation 43, during the first two reporting years

after the entry into force of these regulations, a corporation may, with respect to

regulation 23, attach the reports of an associate which is subject to the accounting

standards and accounting rules published by the Israeli Accounting Standards Board,

if they are prepared according to the Report Preparation Regulations.

Schedule

(Regulations 5 and 6)

Currencies for presentation of financial statements:

(1) New Israeli Shekel;

(2) United States dollar;

(3) Euro.

6 January 2010

Yuval Steinitz

Minister of Finance

Documents

Securities Regulations (Annual Financial Statements ... · Securities Regulations (Annual Financial Statements), 20101 By virtue of my authority under section 36 of the Securities