Lewis Shaw

An Analysis of the Israeli XBRL Adoption Experience

eXtensible Business Reporting Language (XBRL) is a language for the electronic communication of business and financial data which is revolutionizing business reporting around the world. It is a tool to bridge potential language barriers and unify financial reporting. This has appeal to foreign investors among others, who can rely on information in XBRL-tagged financial reports to make investment decisions without having to translate financial statements from local language. In 2008, Israel required most public companies to adopt International Financial Reporting Standards (IFRS) for financial reporting and all public companies to use XBRL-tagged reporting format, as part of an aggressive effort to make its capital markets more transparent and attractive for foreign investors. In this paper we study all Israeli public companies and analyze their XBRL-tagged financial statements that are available on MAGNA, the Israel Securities Authority’s electronic system. We describe the unique process by which the XBRL-based data was collected and reported. In addition we examine these companies’ original full body Hebrew-based financial statements. We document deficiencies in the XBRL-tagged filings, and inconsistencies between them and the Hebrew-based annual reports. Further, we conduct numerous interviews with professionals in the American and Israeli financial communities to gain additional insight on the conversion. This unique analysis allows us to better understand the benefits and challenges of the adoption of XBRL, particularly when coupled with the adoption of IFRS.

Information content of IFRS versus domestic accounting standards: evidence from mandatory IFRS adoption in Israel

Beginning in 2008, most Israeli public companies were required to adopt international financial reporting standards (IFRS). Previously, Israel followed its own set of financial reporting standards - Israeli generally accepted accounting principles (GAAP). This paper examines the impact of the conversion from Israeli GAAP to IFRS on the reporting of financial performance of over six hundred Israeli public companies. Results of this study contribute to the discussion on the impact of mandatory IFRS adoption and have potential implications for other countries currently considering conversion from legacy GAAP to IFRS. In Israels case, the conversion, done to facilitate foreign investment in Israeli companies, had little or no impact on financial results or value relevance of accounting information.