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Financial Reporting
and Accounting
Local Statutory Requirements
There are a number of local statutory requirements requiringcompliance for companies
doing business in Israel.Under the Israeli Companies Law, 1999, both Israeli companies
and branches of foreign entities must maintain books of accounts to record the assets
and liabilities of the company, the transactions, payments, receipts and all the data
required to present the company's financial position to its shareholders.
Israeli Tax Regulations (Bookkeeping) 1973 describe in great details the various books
and records that a company must maintain such as invoices, receipts, inventory lists,
fixed assets registrar and more. These regulations dictate the format, nature and
timing of each document recorded in the books.
The use of an Electronic Record System is permitted if the bookkeeping software
is approved by the tax authorities. The accounting records language can be either
HebreworArabicbut usingEnglish for subsidiariesof foreignentitiesmaybepermitted
if an approval is obtained in advance from the tax authorities. The accounting records
should be maintained in local currency (New Israeli Shekel).
The server onwhich the company's accounting records are recorded shouldbe located
physically in Israel, however in cases of subsidiaries of multinational groups, the tax
authorities may grant an authorization to hold the server out of Israel if an accessible
on-line back up is available at the company's site for inspection purposes.
The accounting record must be kept for 7 years from the end of the tax year that the
entries recorded relate to, or for 6 years from the date that the annual tax return for
the relevant tax year was filed (whichever is later).
Financial Reporting
Rules for Statutory Filings
The Israeli Companies Law, 1999 requires listed companies to file financial statements
in accordance with the Securities Law and requires unlisted companies to file financial
statements prepared in accordance with "generally accepted accounting principles."
The Law also requires the presentation of the financial statements to the annual
general meeting of shareholders. The Board of Directors and management of the
company are responsible for the preparation and fair presentation of the financial
statements. The financial statements must be approved by the Board of Directors
and the balance sheet must be signed by a representative of the Board.