The Israel Accounting Standards Setting Process

The Israel Accounting Standards Board (IsASB) was formed in April 1997 following an agreement between the Israel Security Authority (ISA) and the Institute of Certified Public Accountants in Israel (ICPAs). ISA and ICPAs, the directors of IsASB, agreed not to engage in accounting standard setting after the formation of IsASB and that all accounting standard setting in Israel will be made only through the IsASB.

The agenda of IsASB and the content of the meetings are widely spread among practitioners, regulators, investors and others. The standard-setting process is open to the public: It includes a public hearing and other opportunities for parties interested in financial reporting to express views and to actively participate in the process.

Soon after its establishment, the IsASB decided to adopt the standards issued by the International Accounting Standards Board, both IAS’s and IFRS’s, (hereafter - IFRS’s). Since 2001, IsASB’s activities focus on adopting, on a standard by standard basis, the IFRS. Dov Sapir, the IsASB’s chairman, announced in May 2005, on behalf of IsASB’s board of directors, the decision to fully adopt in Israel all IFRS’s for financial reporting as of the year 2008.
Israel has fully adopted the IFRS as of January 2008.

Organizational Structure

IsASB consists of three distinct bodies:

a. The Board - Seven voting Board members including the Chairman of the Board. In addition to the board members, there are eight non-voting observers, jointly selected by ISA and ICPAs, who participate in the meetings. The Chairman of the Board may invite additional participants in order to provide expert professional opinions on special issues.

b. The Council - A Supervisory Council of 17 members oversees the activities of the Board.

c. The Board of Directors - consists of two members - the Chairman of ISA and the President of ICPAs.

A limited professional staff assists the Board in its activites. The professional staff participates in Board meetings, generates working papers, and co-ordinates Ad Hoc professional teams. In addition to the professional staff, the Chairman of the Board appoints Ad Hoc professional teams to assist in the standard-setting process. The teams may include representatives from leading accounting firms, ISA, financial statements’ users, and major corporations. A team, that usually includes 8-10 people, is assigned to each IFRS in order to prepare it for adoption.


The Standard Setting Process

The Board publishes an Exposure Draft for an Israel Accounting Standard. The Board encourages and solicits discussion, debate and comments on the Exposure Draft, using public hearings and other measures. After the comment period ends, the Board examines the comments and suggestions for improvements received in relation to the Exposure Draft and makes changes and revisions, when necessary. The Board approves an Israel Accounting Standard not before three months have passed since the Exposure Draft was made public. ISA or ICPAs may delay the final approval of a newly approved Israel Accounting Standard, within 30 days of the Board’s approval, for a period not exceeding 90 days from the Board’s approval.

Following a request made by IsASB’s Council, ISA or ICPAs, the Board deliberates and expresses its views regarding certain accounting issues. Such deliberations and resulting decisions are made public soon after the decisions are made.

IsASB’s current work

Since 2001, IsASB’s activities focus on adopting, on a standard by standard basis, the IFRS’s. The adjusting of the financial statements for inflation during periods of a stable economy with one digit inflation rate was a main deviation from International GAAP. As the first step toward the adoption of IFRS’s, the IsASB issued in 2001 Israel Accounting Standard no. 12, Discontinuance of Adjusting Financial Statements for Inflation, which sets out the method of discontinuing the adjustment of financial statements. The Standard is effective for the financial statements for periods beginning on or after 1st January, 2004.

Since its establishment, the IsASB adopted 10 International Accounting Standards in Israel. Another 9 International Accounting Standards are pending final approval and 8 more International Accounting Standards are in the adoption process.