RNS Number : 6232C
Atia Group Limited
03 September 2008
ATIA GROUP LTD.
(Formerly: KIDRON INDUSTRIAL HOLDINGS LTD.)
CONDENSED INTERIM FINANCIAL STATEMENTS
30th June 2008
UNAUDITED
ATIA GROUP LTD.
(Formerly: KIDRON INDUSTRIAL HOLDINGS LTD.)
Condensed Interim Financial Statements
As at 30th June 2008
(UNAUDITED)
TABLE OF CONTENTS
Page
Report of the Board of Directors A - N
Auditor's Review Report 2
Condensed Interim Financial Statements (Unaudited)
Consolidated Balance Sheets 3
Consolidated Profit and Loss Accounts 4
Statements of Recognized Gains and Losses
Consolidated Statements of Changes in Shareholders' Equity 5 - 6
Consolidated Statements of Cash Flows 7 - 10
Notes to the Condensed Interim Financial Statements prepared according 11 - 47
to IFRS
The Board of Directors of
Atia Group Ltd.
(Formerly: Kidron Industrial Holdings Ltd.)
RE: Review of the Interim Consolidated Unaudited Financial
Statements for the Six and Three Month Periods ended 30 June 2008
At your request, we have reviewed the condensed interim consolidated balance sheet of Atia Group Ltd. (formerly: Kidron Industrial
Holdings Ltd.) as at 30 June 2008, and the condensed interim consolidated profit and loss accounts, statements of recognized gains and
losses, the condensed consolidated statement of changes in shareholders' equity and the condensed consolidated statements of cash flows for
the six and three month periods then ended.
Our review was made in accordance with procedures established by the Institute of Certified Public Accountants in Israel. These
procedures included reading the abovementioned condensed interim financial statements, reading minutes of meetings of the shareholders and
of the board of directors and its committees, and making inquiries of persons responsible for financial and accounting matters.
We have been furnished with reports of other accountants in respect of the review of the condensed interim financial statements of a
subsidiary, whose assets included in the consolidation constitute approximately 26% of total consolidated assets as at 30 June 2008.
A review is substantially less in scope than an audit in accordance with generally accepted auditing standards, and accordingly, we do
not express an opinion on the condensed interim consolidated financial statements.
In carrying out our review, including a review of the reports of the other auditors, as mentioned above, nothing came to our attention
that would indicate a need for any material modifications that should be made to the interim consolidated financial statements in order for
them to be considered to be interim financial statements presented in accordance with International Accounting Standard 34, Financial
Reporting for Interim Periods (IAS 34), and the disclosure requirements of the Securities Regulations (Periodic and Immediate Reports),
1970.
We draw your attention to Note 5B pertaining to the fact that the financing of the construction product of the Verge subsidiary is
contingent upon the future impact of the sub-prime crisis on the financial institutions operating in the US. The sub-prime crisis may impact
on the ability of the Verge subsidiary to procure the financing required to complete the construction project and on the terms of such
financing, if procured, and may have an impact on the ability of the customers of the Company to procure mortgages, if necessary, and on the
terms under which such mortgages will be procured. As at the date of the preparation of the financial statements, the Company assesses its
chances of raising the financing of the project as less than probable and, accordingly, it recorded an impairment loss on the project.
Fahn Kanne & Co.
Certified Public Accountants (Isr.)
Tel-Aviv, August 28, 2008
CONSOLIDATED BALANCE SHEETS
Convenience
translation
into � (Note 2)
30 June 31 December 30 June
Note 2008 2007 2007 2008
NIS'000 NIS'000 NIS'000 �' 000
(Unaudited) (Audited) (Unaudited)
A S S E T S
Current Assets
Cash and cash equivalents 45 16 1,249 7
Accounts receivable and debit 397 1,470 842 59
balances
Restricted cash 12,411 12,394 17,306 1,860
Buildings under construction 12,738 25,549 26,526 1,909
_______ _______ _______ _______
25,591 39,429 45,923 3,835
----------- ----------- ----------- -----------
Non-Current Assets
Fixed assets, net 34 55 47 5
Intangible assets 54 107 78 8
Investment real estate 71,242 69,366 69,121 10,677
_______ _______ _______ _______
71,330 69,528 69,246 10,690
----------- ----------- ----------- -----------
_______ _______ _______ _______
Total Assets 96,921 108,957 115,169 14,525
_______ _______ _______ _______
_______ _______ _______ _______
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current Liabilities
Short-term loan 5E 5,920 - - 887
Loans from interested parties 6 8,511 43,756 7,454 1,275
Current maturity of long-term 5A 1,735 - - 260
loan
Sellers of land 40,535 43,185 42,570 6,075
Suppliers and service 2,270 - 2,519 340
providers
Accounts payable and credit 3,290 1,831 1,158 493
balances
Provision for real estate - 6,208 9,191 -
agents
Liabilities in respect of 5A 2,221 - - 333
share allotment agreement
Advances from purchasers of 12,411 12,394 17,306 1,860
apartments
_______ _______ _______ _______
76,893 107,374 80,198 11,523
----------- ----------- ----------- -----------
Long-Term Liabilities
Deferred taxes 2,839 3,659 3,035 426
----------- ----------- ----------- -----------
Shareholders' Equity (Deficit)
Share capital and premium 52,048 5,736 54,269 7,800
Translation differences in 5 1,740 364 1
respect of activities abroad
Accumulated deficit (34,864) (9,552) (22,697) (5,225)
_______ _______ _______ _______
Total Shareholders' Equity 17,189 (2,076) 31,936 2,576
(Deficit)
----------- ----------- ----------- -----------
_______ _______ _______ _______
Total Liabilities and 96,921 108,957 115,169 14,525
Shareholders' Equity (Deficit)
_______ _______ _______ _______
_______ _______ _______ _______
Yosef Atia Shalom Atia Dan Ofer
CEO and Director, deputy chairman of CFO
Director the board,
in accordance with the
authorization of
the board given on 28 August
2008
Date of approval of financial statements: August 28, 2008.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
Convenience translation
into � (Note 2)
Six month period Three month period ended 30 June Year ended Six month period Three month
period
ended 30 June 31 ended 30 June ended 30 June
December
2008 2007 2008 2007 2007 2008 2008
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 �' 000 �' 000
(Unaudited) (Unaudited) (Audited) (Unaudited)
Change in fair value of - 18,294 - 18,294 18,294 -
-
investment real estate
--------- --------- --------- --------- --------- ---------
---------
Selling and marketing expenses 427 19,060 - 14,575 29,621 64
-
General and administrative 2,682 1,266 1,409 634 3,023 402
211
expenses
Provision for decrease in 8,196 - 8,196 - - 1,228
1,228
value of buildings under
construction (**)
______ ______ ______ ______ ______ ______
______
11,305 20,326 9,605 15,209 32,644 1,694
1,439
--------- --------- --------- --------- --------- ---------
---------
______ ______ ______ ______ ______ ______
______
Operating income (loss) before (11,305) (2,032) (9,605) 3,085 (14,350) (1,694)
(1,439)
financing
Financing income 9 - - - 33 1
-
Financing expenses (1,004) (1,013) (735) (1,013) (1,831) (150)
(110)
______ ______ ______ ______ ______ ______
______
Operating income (loss) after (12,300) (3,045) (10,340) 2,072 (16,148) (1,843)
(1,549)
financing and before taxes on
income
Tax benefit (expenses) 133 (3,499) 123 (3,499) (3,541) 20
18
______ ______ ______ ______ ______ ______
______
Loss for the period (12,167) (6,544) (10,217) (1,427) (19,689) (1,823)
(1,531)
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
Loss per share attributed to
the shareholders of the
Company - in NIS
Basic loss per share (*) (0.97) (0.85) (0.82) (0.17) (2.19) (0.15)
(0.12)
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
Diluted loss per share (*) (0.97) (0.85) (0.82) (0.17) (2.19) (0.15)
(0.12)
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
(*) The calculation was made retroactively after taking into consideration the consolidation of the share capital that was conducted
on 21 May 2008. See also Note 5D.
(**) See Note 5B.
STATEMENTS OF RECOGNIZED GAINS AND LOSSES
Convenience translation
into � (Note 2)
Six month period Three month period ended 30 June Year ended Six month period Three month
period
ended 30 June 31 ended 30 June ended 30 June
December
2008 2007 2008 2007 2007 2008 2008
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 �' 000 �' 000
(Unaudited) (Unaudited) (Audited) (Unaudited)
Total recognized losses for (12,167) (6,544) (10,217) (1,427) (19,689) (1,823)
(1,531)
the period
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Six month period ended 30 June 2008
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balance as of 1 January 2007 845 - (3,008) (2,163)
Adjustments deriving from the - 364 - 364
translation of the financial
statements of investee
companies
Loss for the year - - (19,689) (19,689)
Share issue as part of the 4,891 - - 4,891
acquisition of Sitnica
Conversion of loans from 40,130 - - 40,130
interested parties into share
capital
Reverse acquisition 8,403 - - 8,403
______ _____ _______ ______
Balance as at 31 December 2007 54,269 364 (22,697) 31,936
(Audited)
Adjustments deriving from the - (359) - (359)
translation of the financial
statements of investee
companies
Issuance costs in respect of a (2,221) - - (2,221)
share allotment agreement (*)
Loss for the period - - (12,167) (12,167)
______ _____ _______ ______
Balance as at 30 June 2008 52,048 5 (34,864) 17,189
______ _____ _______ ______
______ _____ _______ ______
Six month period ended 30 June 2007
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balance as of 1 January 2007 845 - (3,008) (2,163)
Adjustments deriving from the - 1,740 - 1,740
translation of the financial
statements of investee
companies
Loss for the period - - (6,544) (6,544)
Share issue as part of the 4,891 - - 4,891
acquisition of Sitnica
______ _____ _______ ______
Balance as at 30 June 2007 5,736 1,740 (9,552) (2,076)
______ _____ _______ ______
______ _____ _______ ______
Six month period ended 30 June 2008
Convenience translation into � (Note 2)
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
�' 000 �' 000 �' 000 �' 000
Balance as at 1 January 2008 8,133 54 (3,402) 4,785
Adjustments deriving from the - (53) - (53)
translation of the financial
statements of investee
companies
Issuance costs in respect of a (333) - - (333)
share allotment agreement (*)
Loss for the period - - (1,823) (1,823)
______ _____ _______ ______
Balance as at 30 June 2008 7,800 1 (5,225) 2,576
______ _____ _______ ______
______ _____ _______ ______
(*) See Note 5A.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont.)
Three month period ended 30 June 2008
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balance as of 1 April 2008 52,048 (204) (24,647) 27,197
Adjustments deriving from the - 209 - 209
translation of the financial
statements of investee
companies
Loss for the period - - (10,217) (10,217)
______ _____ _______ ______
Balance as at 30 June 2008 52,048 5 (34,864) 17,189
______ _____ _______ ______
______ _____ _______ ______
Three month period ended 30 June 2007
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balance as of 1 April 2007 845 108 (8,125) (7,172)
Adjustments deriving from the - 1,632 - 1,632
translation of the financial
statements of investee
companies
Loss for the period - - (1,427) (1,427)
Share issue as part of the 4,891 - - 4,891
acquisition of Sitnica
______ _____ _______ ______
Balance as at 30 June 2007 5,736 1,740 (9,552) (2,076)
______ _____ _______ ______
______ _____ _______ ______
Three month period ended 30 June 2008
Convenience translation into � (Note 2)
(Unaudited)
Share Translation Accumulated deficit Total
capital and differences in
premium respect of
activities abroad
�' 000 �' 000 �' 000 �' 000
Balance as of 1 April 2008 7,800 (30) (3,694) 4,076
Adjustments deriving from the - 31 - 31
translation of the financial
statements of investee
companies
Loss for the period - - (1,531) (1,531)
______ _____ _______ ______
Balance as at 30 June 2008 7,800 1 (5,225) 2,576
______ _____ _______ ______
______ _____ _______ ______
CONSOLIDATED STATEMENTS OF CASH FLOWS
Convenience translation
into � (Note 2)
Six month period Three month period ended 30 June Year ended Six month period Three month
period
ended 30 June 31 ended 30 June ended 30 June
December
2008 2007 2008 2007 2007 2008 2008
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 �' 000 �' 000
(Unaudited) (Unaudited) (Audited) (Unaudited)
Net cash flows from operating
activities
Loss for the period (12,167) (6,544) (10,217) (1,427) (19,689) (1,823)
(1,531)
Adjustments required to 7,244 (11,297) 8,241 (7,516) (6,643) 1,084
1,235
reconcile net cash from
operating activities (A)
______ ______ ______ ______ ______ ______
______
Net cash used in operating (4,923) (17,841) (1,976) (8,943) (26,332) (739)
(296)
activities
--------- --------- --------- --------- --------- ---------
---------
Cash flows from investment
activities
Purchases of fixed assets - (21) - - (21) -
-
Investments in intangible - (21) - (4) (21) -
-
assets
Investments in investment real (5,210) (6,746) (4,813) (6,746) (8,022) (781)
(721)
estate
Cash deriving from the - 4,891 - 4,891 4,891 -
-
issuance of shares as part of
the acquisition of Sitnica
Purchase of companies - - - - 8,198 -
-
consolidated for the first
time (B)
______ ______ ______ ______ ______ ______
______
Net cash provided by (used in) (5,210) (1,897) (4,813) (1,859) 5,025 (781)
(721)
investment activities
--------- --------- --------- --------- --------- ---------
---------
Cash flows for financing
activities
Receipt (repayment) of loans (1,169) 18,318 (2,399) 9,505 22,545 (175)
(360)
from interested parties, net
Receipt of long-term loan 1,696 - - - - 254
-
Receipt of short-term loan 5,923 - 5,923 - - 888
888
______ ______ ______ ______ ______ ______
______
Net cash provided by financing 6,450 18,318 3,524 9,505 22,545 967
528
activities
--------- --------- --------- --------- --------- ---------
---------
Translation differences in 2,482 1,305 2,003 1,305 (119) 373
300
respect of cash balances of
activities abroad
--------- --------- --------- --------- --------- ---------
---------
______ ______ ______ ______ ______ ______
______
Increase (decrease) in cash (1,201) (115) (1,262) 8 1,119 (180)
(189)
and cash equivalents
Cash and cash equivalents, 1,249 131 1,308 8 131 187
196
beginning of the period
Impact of exchange rate (3) - (1) - (1) -
-
fluctuations on foreign
currency-denominated cash
balances
______ ______ ______ ______ ______ ______
______
Cash and cash equivalents, end 45 16 45 16 1,249 7
7
of the period
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
A. Adjustments required to reconcile net cash from operating activities
Convenience translation
into � (Note 2)
Six month period Three month period ended 30 June Year ended Six month period Three month
period
ended 30 June 31 ended 30 June ended 30 June
December
2008 2007 2008 2007 2007 2008 2008
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 �' 000 �' 000
(Unaudited) (Unaudited) (Audited) (Unaudited)
Income and expenses not
constituting a current flow of
funds:
Change in fair value of - (18,294) - (18,294) (18,294) -
-
investment real estate
Provision for decrease in 8,196 - 8,196 - - 1,228
1,228
value of buildings under
construction
Depreciation and amortization 21 20 10 20 45 3
1
Impact of exchange rate 3 - 1 - 1
fluctuations on foreign
currency-denominated cash
balances
Interest on loans from - - - - 2,018 -
-
interested parties
Interest on long-term loan 146 - 30 - - 22
5
Deferred taxes, net (40) 3,499 (124) 3,499 3,541 (6)
(19)
______ ______ ______ ______ ______ ______
______
8,326 (14,775) 8,113 (14,775) (12,689) 1,247
1,215
--------- --------- --------- --------- --------- ---------
---------
Changes in assets and
liabilities:
Decrease (increase) in 393 (373) 369 1,178 641 59
55
accounts receivable and debit
balances
Decrease (increase) in 2,807 (12,105) 2,952 (12,105) (18,495) 421
443
restricted cash
Increase in buildings under (2,480) (2,104) (1,527) (485) (5,729) (372)
(229)
construction
Increase (decrease) in (559) - 90 - 2,079 (84)
13
suppliers and service
providers
Increase (decrease) in 1,564 (108) 1,273 503 (767) 234
191
accounts payable and credit
balances
Increase (decrease) in - 6,063 (77) 6,063 9,822 -
(12)
provision for real estate
agents
Increase (decrease) in (2,807) 12,105 (2,952) 12,105 18,495 (421)
(441)
advances from purchasers of
apartments
______ ______ ______ ______ ______ ______
______
(1,082) 3,478 128 7,259 6,046 (163)
20
--------- --------- --------- --------- --------- ---------
---------
______ ______ ______ ______ ______ ______
______
7,244 (11,297) 8,241 (7,516) (6,643) 1,084
1,235
______ ______ ______ ______ ______ ______
______
______ ______ ______ ______ ______ ______
______
CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
Convenience translation
into � (Note 2)
Six month period Three month period ended 30 June Year ended Six month period Three month period
ended 30 June 31 ended 30 June ended 30 June
December
2008 2007 2008 2007 2007 2008 2008
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 �' 000 �' 000
(Unaudited) (Unaudited) (Audited) (Unaudited)
B. Purchase of companies consolidated for the first time
Working capital, excluding - - - - (205) - -
cash
Issuance of shares - - - - 8,403 - -
______ ______ ______ ______ ______ ______ ______
Net cash provided by purchase - - - - 8,198 - -
of companies consolidated for
the first time
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
C. Material non-cash transactions
Recording of a liability 2,221 - - - - 333 -
against share allotment
expenses
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
Conversion of loans from - - - - 40,130 - -
interested parties into share
capital
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
Capitalization of interest on 894 1,751 314 1,001 1,722 134 47
interested-party loans to
inventory of buildings under
construction
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
Investments in investment real 541 41,303 - 41,303 42,690 81 -
estate against sellers of land
and suppliers and service
providers and loans form
interested parties
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
D. Additional information on cash flows
Cash received during the
period in respect of
Interest 9 - - - 33 1 -
______ ______ ______ ______ ______ ______ ______
______ ______ ______ ______ ______ ______ ______
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS
NOTE 1 - GENERAL
A. The Company is engaged through a subsidiary in apartment construction in the U.S. and holds a real estate asset through a
subsidiary in Croatia.
B. The Company has investments in subsidiaries.
C. Definitions
The Company - Atia Group Ltd. (Formerly: Kidron Industrial Holdings
Ltd.)
Subsidiaries - Companies over which the Company exerts direct or
indirect control (as defined in IAS 27) and,
accordingly, the financial statements of which are
consolidated with those of the Company.
Investee companies - Subsidiaries
Group - The Company and its investee companies.
Interested parties - As defined in the Securities Regulations
(Presentation of Annual Financial Statements), 1993.
Related parties - As defined in IAS 24.
Controlling parties - As defined by the Securities Regulations (Financial
Statements Presentation of Transactions between an
Entity and its Controlling Shareholder), 1996.
Index, ICPI - The Israeli Consumer Price Index as publicized by the
Israeli Central Bureau of Statistics.
Dollar - The U.S. dollar.
Kuna - The Croatian currency.
Euro - The currency of the European Union.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. The measurement basis for the financial statements
In July 2006, the Israel Accounting Standards Board issued Accounting Standard No. 29, Adoption of International Financial Reporting
Standards (IFRS) (hereinafter - the "Standard") which stipulates that an entity that is subject to the Securities Law- 1968 and is required
to report in accordance with the regulations of the law, shall present its financial statements in accordance with International Financial
Reporting Standards (hereinafter - "IFRS"). This stipulation applies to periods commencing on or after 1 January 2008.
In view of the above, the interim consolidated financial statements of the Group as at 30 June 2008 and for the six and three-month
periods then ended hereinafter (the "Interim Financial Statements") are presented in accordance with IFRS, on the basis of the provisions of
IAS 34, Reporting for Interim Periods. The transition date for implementing IFRS is 1 January 2007 and the balance sheet as at that date is
the opening balance.
International Financial Reporting Standards include:
1. International Financial Reporting Standards (IFRS)
2. International Auditing Standards (IAS)
3. Clarifications made by the International Financial Reporting Interpretations Committee (IFRIC) or by the committee that preceded
the IFRIC regarding interpretations of international accounting standards (SIC).
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
A. The measurement basis for the financial statements (cont.)
The consolidated financial statements of the Group for the year ended 31 December 2008 will be the first annual financial statements pf
the Group presented in accordance with IFRS. These interim financial statements are the first financial statements of the Company presented
on the basis of IFRS in accordance with the provisions of IAS 34. For purposes of the initial implementation of IFRS, the Group implemented
IFRS 1, First time Adoption of International Financial Reporting Standards.
The consolidated financial statements were presented in accordance with the IFRS that are relevant to the activities of the Group and
which are in effect at the reporting date of the company's first annual financial statements, including clarifications and interpretations
issued by the International Accounting Standards Board, and the International Financial Reporting Interpretations Committee (IFRIC).
In Addition, the interim financial statements are presented in accordance with the provisions of Chapter D of the Israeli Securities
Regulations (periodic and Immediate Reports) - 1970, except for regulations that do not allow for the implementation of IFRS or those items
permitted therein.
Prior to the adoption of IFRS, the Company presented its financial statements in accordance with accounting principles generally
accepted in Israel. The latest annual financial statements of the Company according to accounting principles generally accepted in Israel
were those presented for the year ended 31 December 2007.
The consolidated financial statements are presented in accordance with the historical cost convention, except for investment real estate
and financial instruments which are measured at fair value.
The Group elects to follow the following exemptions:
Business combinations and investments in investee companies
The Company elected to implement the provisions of IFRS 3, Business Combinations, only in respect of business combinations occurring
after 1 January 2007 (the transition date).
Accumulated translation differences
Translation differences in respect of autonomous investees in respect of periods that preceded the implementation date shall be carried
to retained earnings on the date of the initial implementation of IFRS.
B. Use of critical accounting estimates
Preparation of financial statements in conformity with international accounting standards requires management to make accounting
estimates and assumptions that involve discretion and affect the amounts of assets and liabilities presented in the financial statements,
the disclosure of contingent assets and contingent liabilities at the date of the financial statements and the amounts of revenues and
expenses during the reporting periods, and the accounting policies set out for the Group. Actual results could differ from those estimates.
According to IFRS 1, the Company is required, among other things, to disclose those accounting principles, the implementation of which
involve the use of estimates that are significantly sensitive to future events, the occurrence of which may impact on the reported amounts.
See Note 3 for details of the assumptions and estimates which are significantly sensitive to future events.
C. Functional currency and presentation currency of the financial statements
1. Each of the Group companies compiles its financial statements on the basis of the currency of the country and major economic
environment in which it operates or which constitutes the currency which has the greatest impact on the company (hereinafter - the
"functional currency").
2. The consolidated financial statements of the Group are presented in NIS, which constitutes the functional currency of the Company
and the presentation currency of the Group.
3. When translating the financial statements of subsidiaries (whose functional currency differs from that of the Company), the
Company implemented the following procedures:
a. Monetary and non-monetary assets and liabilities were translated using the closing rate in
effect on each balance sheet date.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
C. Functional currency and presentation currency of the financial statements (cont.)
3. (cont.)
b. Income and expense items for each period in respect of which an income statement is presented were translated on the basis of the
average exchange rate during the relevant period. Notwithstanding, in cases on which there were significant fluctuations in exchange rates,
income and expense items were translated using the exchange rate in effect on the transaction date.
c. Share capital, capital reserves, and other changes in capital were translated using the exchange rate in effect on the transaction
date.
d. All exchange rate differentials resulting from the aforementioned accounting treatment were classified as a separate item in
shareholders' equity under the caption "Translation differences in respect of activities abroad" until the investment is realized.
e. In implementing the aforementioned procedures, the Company used the representative rate of exchange.
D. Assets, liabilities and transactions linked to the Index or in foreign currency
1. Assets and liabilities denominated in or linked to foreign currency are presented on the basis of the representative rate of
exchange as of the balance sheet date.
2. Transactions denominated in foreign currency are recorded upon initial recognition at the representative rate of exchange on the
date of the transaction. Exchange rate differences deriving from the settlement of monetary items, at exchange rates that are different than
those used in the initial recording during the period, or than those reported in previous financial statements, are carried to the profit
and loss accounts.
3. Assets and liabilities linked to the Israeli Consumer Price Index are presented on the basis of the linkage terms of each balance.
Balances linked by agreement to the "known index" were presented on the basis of the "known index" as of the balance sheet date (the Index
for February).
4. Linkage and exchange rate differentials are recorded when incurred, as part of financing income or financing expenses, as
applicable.
5. Data pertaining to the ICPI and to the foreign currency exchange rates are presented below:
ICPI Exchange rate of Exchange rate of kuna Exchange
(base dollar rate of
1993) euro
As at:
30 June 2008 195.62 3.352 0.7345 5.2849
30 June 2007 186.67 4.249 0.7856 5.7132
31 December 2007 191.15 3.846 0.7744 5.6592
Change during the period: % % % %
6 months ended 30 June:
2008 2.34 (12.84) (5.15) (6.61)
2007 0.97 0.57 3.46 2.68
3 months ended 30 June:
2008 2.24 (5.66) (4.47) (5.91)
2007 1.21 2.26 4.57 3.23
Year ended 31 December 2007 3.40 (8.97) 2.07 1.71
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
E. Consolidated financial statements
The consolidated financial statements include the financial statements of the Company and companies in which it has "control", i.e., the
direct or indirect ability to direct the financial and operational policies of such companies, as well as the ability to derive economic
benefit from their activities (hereinafter - "Subsidiaries"). In ascertain "control", potential voting rights which are exercisable as at
the balance sheet date are taken into consideration.
The purchase cost of a subsidiary is measured at fair value of the assets given, financial instruments issued and liabilities generated,
plus the direct purchase costs. Identifiable assets, identifiable liabilities and the contingent liabilities of the acquired company were
recognized in the consolidated balance sheets at their full fair value as at the purchase date, ignoring the share of the minority if any.
The results of operations of subsidiaries purchased or sold during the reporting periods were included in the financial statements of
the Group or deducted therefrom commencing from the date on which effective control over the acquired company is achieved or the date of the
effective sale, as relevant.
For purposes of the consolidation, the amounts included in the financial statements of consolidated companies were taken into account
after the necessary adjustments required as a result of implementation of uniform accounting policies applied by the Group. Material
intercompany balances and transactions between the companies consolidated were cancelled in the consolidated financial statements. In
addition, income on sales between companies, which has not yet been realized outside of the Group, was also cancelled.
F. Cash and cash equivalents
Cash and cash equivalents include highly liquid investments, which include short-term bank deposits (with original maturity dates of up
to three months from date of deposit) that are not restricted as to withdrawal or use, with original terms to maturity of not more than
three months.
For purposes of preparing the cash flows statements, cash and cash equivalents are not net of overdrafts at banking institutions.
G. Restricted cash
The balance of restricted cash includes amounts which the Group deposited to secure its commitments to apartment purchasers.
H. Buildings under construction
The buildings under construction are presented at the lower of cost or the estimated net usage value. Cost includes direct identifiable
costs, subcontractors costs, joint indirect costs, and capitalized credit costs. Joint indirect costs were allocated to work in process on
the basis of various allocation keys. The net realization value is the estimated sales price during the normal course of business, less the
estimated costs to completion and the estimated costs required to carry out the sale.
In cases in which a loss is expected on buildings under construction, a provision for the full expected loss is recorded on the date the
loss was anticipated, based on the best estimate of Management regarding the expected loss.
For information pertaining to the provision for the impairment loss in the inventory of buildings under construction in respect of the
Verge subsidiary, see Note 5B below.
I. Reverse acquisition
As part of the merger of the Company with Verge Living Corporation (hereinafter - "Verge") and Sitnica D.o.o. (hereinafter - "Sitnica"),
the controlling shareholders of Verge and Sitnica obtained control over the merged entity. Since the largest of the companies included in
the transaction was Verge, it was determined that from an accounting standpoint, Verge is the accounting acquirer of the other companies.
Therefore, the transaction was accounted for as a reverse acquisition, whereby Verge acquired the Company (for information on the purchase
of Sitnica, see J below).
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
I. Reverse acquisition (cont.)
According to IFRS 3, the following reverse acquisition principles were implemented:
- The assets and liabilities of the accounting purchaser (the legal subsidiary - Verge) were recognized
in the consolidated financial statements at their book values immediate prior to the reverse
acquisition transaction.
- In view of the fact that the accounting acquiree (the Company) constituted a stock market shell as at
the date of acquisition, no goodwill or original difference was generated in respect thereof.
- Retained earnings and other equity items of the consolidated entity following the merger are those of
the accounting acquirer, which is the legal subsidiary, Verge, immediately prior to the business
combination (although the legal capital structure, i.e., type and number of shares, remains that of the
legal parent company, the Company).
- Comparative amounts of the merged entity are those of the legal subsidiary, Verge. Accordingly,
there is no expression given to the former activity of the Company as part of the financial statements.
J. Combinations of businesses under common control
The investment of the Company in Sitnica, which constitutes a combination of businesses under common control, was treated under the
"Pooling of Interests" method. The "Pooling of Interests" method will be implemented by the acquiring entity, in connection with
transactions of combinations of businesses under common control, in accordance with the following principles:
a. The assets and liabilities of the acquired entity were initially recognized in the (consolidated) financial statements of the
acquiring entity at their book values in the (consolidated) financial statements of the controlling shareholder immediately prior to the
business combination transaction (in accordance with generally accepted accounting principles).
b. The difference between the consideration of the transaction and the book value of the net assets of the acquired company is
carried directly to retained earnings.
c. The consolidated financial statements of the acquiring company reflect the financial position and the results of operations of the
acquiring company and the acquired company, which are consolidated by way of a business combination, as if a business combination had been
effected on the date on which both companies came under common control. This manner of presentation shall be reflected in both the
consolidated financial statements of the acquiring entity for the current period, and the comparative amounts for prior periods, which were
restated in order to reflect the business combination in the manner described above.
K. Fixed assets
1. Fixed asset items are presented in accordance with the cost model - fixed asset items accounted for using the cost model are
presented at cost, net of accumulated depreciation. In addition to the purchase price, cost includes all of the costs that can be directly
attributed to bringing the item to the location and condition that enable it to operate in the manner intended by Management. Fixed assets
of subsidiaries are presented at their fair value on the date they were purchased by these companies.
2. Fixed assets are removed from the books upon realization or when no future economic benefits are expected to derive from their use
or disposal. Gain or loss deriving from the disposition of fixed assets are carried to the profit and loss accounts.
3. The residual value and useful life span of fixed asset items are assessed at least at the end of each fiscal year, with any
changes being treated as changes in accounting estimates.
4. Depreciation is calculated on the straight-line method, on the basis of the estimated useful lives of the assets or of an
identifiable component thereof.
Annual depreciation rates are as follows:
%
Computers 20 - 33
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
L. Investment real estate
Investment real estate is defined as real estate (land or buildings - or part of a building - or both) held (by the owners or by a lesse
under a financing lease) for purposes of generating rental income or for increase in value or both, and not for purposes of manufacturing or
the provision of goods or services or for administrative purposes, or for sale in the ordinary course of business.
Investment real estate assets are measured subsequent to initial recognition at fair value which reflects market conditions at each
balance sheet date. Changes in fair value after initial recognition are recognized in the profit and loss accounts. Such real estate is not
depreciated. For purposes of determining fair value of investment real estate assets, the Company based itself on an appraisal carried out
by external independent appraisers who are experts in valuating real estate and who possess the necessary know-how and experience.
M. Impairment of non-monetary assets
Depreciable assets are assessed for a possible decline in value when events or circumstances occur that may indicate that the book value
of the asset is not recoverable.
When the value of an asset in the consolidated balance sheet exceeds its recoverable value, the Company recognizes a loss on decline in
value in an amount equal to the difference between the book value of the asset and its recoverable value, which is the higher of its net
selling price and its value in use (the present value of the estimated future cash flows expected to derive from the use and disposal of the
asset). A loss in respect of a decline in value that was recognized in the past is cancelable, except if it relates to goodwill, only if
changes occurred in the estimates used to determine the recoverable value of the asset, subsequent to the date on which the last loss on
decline in value was recognized.
Impairment losses are carried to the profit and loss accounts.
N. Taxes on income
Current taxes
The tax liability in respect of current taxes is based on the tax rates and tax laws in effect as at the balance sheet date, as well as
on adjustments required in connection with the tax liability in respect of prior years.
Deferred taxes
Deferred taxes are computed in respect of temporary differences between the amounts presented in the financial statements and the
amounts taken into consideration for income tax purposes.
Deferred taxes were computed using the tax rates expected to be applicable when the deferred tax balances are carried to the profit and
loss accounts, based on the tax laws in effect at the balance sheet date. The amount of the deferred taxes included in the profit and loss
accounts derives from changes occurring in the balances during the current year (except for taxes deriving from the initial recognition of a
business combination and except for taxes related to transactions that were recognized directly to retained earnings). Deferred taxes with
debit balances are recognized up to the amount of taxable income expected in the future, against which such deferred taxes will be
utilized.
In calculating deferred taxes, taxes which may apply in the event of a sale of an investment in investee companies were not taken into
account, since management intends on holding on to such investments and not realizing them in the foreseeable future.
Deferred tax assets and liabilities are presented in the balance sheet as part of long-term liabilities.
The Company may bear an additional tax liability in the event of a distribution of a dividend from certain investee companies; this
additional tax was not included in the accounts in view of the policy of the Company not to initiate the distribution of a dividend that
would generate an additional tax liability in the foreseeable future.
Due to the uncertainty in connection with the utilization of the losses of the U.S. subsidiary, no deferred tax assets were included in
the financial statements.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
O. Revenue recognition
Revenues are recognized in the financial statements if the amount of the revenue can be measured reliably and as long as the revenue is
expected to be collectible. The income is measured on the basis of the fair value of the consideration of the transaction, net of discounts
and net of returns.
Income from credit transactions containing a financing component are recognized at their present value. The difference between the fair
value of the transaction and the denominated amount of the consideration is carried to the profit and loss accounts as financing income,
using the effective interest method.
Revenue recognition is based on the following principles:
Revenues from sales of apartments
Revenues from sales of apartments, less discounts granted, are recognized on the date that the risks and yields deriving from ownership
are transferred to the customer (usually on the date legal title is transferred, but in any event, not prior to delivery), and subject to
the Company's not having any additional significant performance commitments in connection with the transaction.
P. Capitalization of credit costs
Credit costs directly attributable to the purchase or construction of qualifying assets are carried to the cost of such assets over the
construction period (the period in which actions are taken to prepare the asset for its designated purpose). A qualifying asset is an asset
under construction or preparation, the preparation of which for intended use requires a significant period of time (mainly the buildings
under construction).
Q. Loans from banking institutions and others
Short-term loans and credit received from banking institutions and others are initially recognized in the financial statements on the
basis of fair value, less direct costs. Subsequent to initial recognition, these loans are presented at amortized cost, using the effective
interest method which also takes in account direct costs. The effective interest is carried to the profit and loss accounts as part of
financing income or financing expenses.
R. Advertising costs
Advertising costs are expensed when incurred.
S. Intangible assets
Software costs are presented at cost less accumulated amortization, on the straight line method over a three-year period commencing on
the date the software is initially used. Amortization expenses are carried to the profit and loss accounts as part of general and
administrative expenses.
T. Provisions for real estate agents
The U.S. subsidiary entered into agreements with real estate agents for payments of commissions in respect of the sale of apartments in
the Las Vegas project. According to the agreements, the Company pays commissions at rates of between 3.8% - 5.8% for each apartment sold.
50% of the commission is paid to the agent upon the signing of the agreement and the other 50% is to be paid when title is transferred to
the purchaser of the apartment. As at 30 June 2008, and in view of the fact that Verge Management believes that its chances of raising funds
to finance the project are less than probable and in view of the fact that in the second quarter of 2008, Verge recorded a provision for a
decline in the value of the project down to the value of the vacant property, the provision for real estate agents that was to have been
paid at the end of the project upon the transfer of title of the apartments to the purchasers was also written off.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
U. Financial assets
Financial assets subject to IAS 39 are initially recognized at fair value plus transaction costs that can be directly attributed to the
purchase or issuance, except in respect of financial assets measured at fair value through profit and loss.
Loans and receivables -
Loans and receivables are non-derivative financial instruments that are either fixed-payment or can be fixed, which are not quoted on an
active market. Loans and receivables are presented as non-current assets, except for loans and receivables whose maturity dates do not
exceed 12 months subsequent to the balance sheet date, which are presented as part of current assets. Loans and receivables are presented at
amortized cost, on the basis of the effective interest method, taking transaction costs into account. Gains or losses car carried to the
profit and loss accounts when the investment is disposed of, in the event of a provision for impairment losses or as a result of systematic
amortization.
V. Fair value of financial instruments
The fair value of financial instruments traded on active markets is based on quotes from those markets as at the relevant balance sheet
date. The fair value of financial assets not traded on active markets is based on the market value of similar financial instruments or on
other valuation methods.
W. Transactions between an entity and its controlling shareholder
Assets and liabilities in respect of which a transaction was carried out between the Company and its controlling shareholder or between
companies under common control are recognized on the date of the transaction at fair value. The difference between the fair value and the
consideration stipulated in the transaction is carried to retained earnings, less the tax effect. A debit difference is considered to be a
dividend, thereby reducing retained earnings. A credit difference constitutes an investment of the shareholders and is carried to a separate
item in shareholders' equity, "Capital reserve in respect of a transaction with a controlling shareholder".
The fair value of an asset or liability is determined on the basis of accepted valuation methods in the absence of up-to-date market price
quotes of the assets and liabilities.
In the event that a loan is granted to or received from a controlling shareholder, the loan is presented at fair value at the date of
the transaction and, in subsequent periods, at amortized cost using the effective interest method. In respect of a loan for which no
maturity date is set, and in respect of which there is a commitment on the part of the shareholder not to demand repayment of the loans for
a number of years, the fair value is computed on the basis of management estimate regarding the first possible repayment period. In the
event that the first repayment date cannot be estimated, the loan shall be considered as having been granted or received for a period of one
year, and the fair value shall be determined yearly on the basis of the present value of the expected cash flows from the loan, discounted
at the Company's interest rate each year.
X. Earnings (loss) per share
Earnings (loss) per share are computed by dividing the income that is distributable to the ordinary shareholders by the weighted average
number of ordinary shares in circulation during the period.
For purposes of computing the diluted earnings (loss) per share, the income that is distributable to the ordinary shareholders and the
weighted average of ordinary shares in circulation are adjusted for the possible impact of potential ordinary shares, which may derive from
the exercise of convertible financial instruments (option warrants and convertible debentures) which have a dilutive effect.
For purposes of computing earnings per share, the share of the Company in the income of investee companies is computed on the basis of the
product of the earnings per share of the investee companies and the number of shares held by the Company.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
Y. Provisions for contingent liabilities
The Company includes in its financial statements provisions for contingent liabilities in respect of legal suits when the Group has a
legal or implied commitment to bear economic resources as a result of past events, it is expected (more reasonable that not) that it will
have to use economic resources to settle the commitment, and the amount of the commitment can be reliably estimated.
A provision that meets the recognition criteria is measured at the present value of the best possible estimate of Management in
connection with the expected cash flows that will be needed to settle the commitment as at the balance sheet date. The discount rate used to
compute present value reflects market assessments regarding the value of time in respect of the commitment.
Z. Summary of new financial reporting standards and clarification issued but not yet in effect, relevant to the operations of the
Company
1. IFRS 8 - Operating Segments
IFRS 8 deals with operating segments and replaces IAS 14, Segment Reporting. The Standard applies to companies, the shares of which are
listed for trade or are in the process of being listed for trade on any stock exchange.
The Standard stipulates that an entity provide segment reporting based on analyses of Company Management and on internal company reports
(the "management approach"), in order to supply more relevant information to shareholders and users of financial statements - information on
the position of the Company from the viewpoint of management. According to the Standard, an entity shall make disclosure of information that
will enable users of the financial statements to assess the nature and financial consequences of the business activities in which the
Company engages and the economic environment in which it operates.
In addition, information shall be provided in connection with revenues deriving for the products or services of the entity (or groups
of similar products or services), the policies from which the revenues or assets derive, and major customers, without taken into
consideration whether or not management uses such information in making its operational decisions.
The Standard shall apply in respect of annual financial reporting periods commencing on or after 1 January 2009. Early implementation is
recommended with disclosure of that fact required. The provisions of the Standard shall be applied retroactively, by way of restatement,
unless it is impractical to do so.
In the opinion of the Company, the impact of the new Standard is not expected to be material.
2. IAS 23 (Revised) - Credit Costs
IAS 23 (Revised) requires the capitalization of credit costs that are attributed directly to the purchase, construction or self
manufacturing of a qualifying asset. A qualifying asset is one that requires a significant period of time to prepare it for its intended use
or sale. The Standard does not permit the immediate expensing of financing costs of a qualifying asset, as was the accepted practice in the
past.
The Standard shall apply to the financial statements of periods commencing on or after 1 January 2009 and requires retrospective
adoption. Early implementation is allowed with disclosure of that fact required.
In view of the fact that the Company's policy is to capitalize credit costs to qualifying assets, in the opinion of the Company, the
revised Standard is not expected to affect the results of operations, financial position and cash flows of the Company.
3. IAS 32, Financial Instruments: Presentation (Revised) and IAS 1, Financial Statement Presentation (Revised)
According to the revisions of IAS 32 and IAS 1 (hereinafter - the "Standards"), certain financial instruments that are puttable, as well
as liabilities generated as a result of liquidation, have to be classified as equity, in the event that a number of criteria are met. In
addition, the entity is required to provide appropriate disclosure of puttable financial instruments that are classified as equity.
The revised Standards shall apply to annual financial reporting periods commencing on or after 1 January 2009. Early adoption is allowed
with disclosure of that fact required.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
Z. Summary of new financial reporting standards and clarification issued but not yet in effect, relevant to the operations of the
Company (cont.)
4. IAS 1 (Revised) - Financial Statement Presentation
IAS 1 (Revised) mandates the presentation of a separate Report of Comprehensive Income, as part of which the entity must present, in
addition to the net income for the period, all of the other items that were carried directly to shareholders' equity and which do not derive
from transactions with the shareholders of the Company. Among other things, the following items must be presented: translation differences
in respect of the financial statements of foreign operations, amounts carried to a revaluation reserve in respect of the revaluation of
fixed asset items, fair value adjustments in respect of assets classified as available for sale, deferred gains or losses in respect of
derivative financial instruments designed to hedge cash flows, etc., and the tax effects in respect of such items. The revised Standard
permits the presentation of comprehensive income items together with the profit and loss accounts, as part of a report entitled "Report on
Comprehensive Income". Items deriving from transactions with the Company's shareholders by virtue of the relationship between the Company and its shareholders (e.g., a share issue, dividends, etc.)
shall be presented as part of the statement of changes in shareholders' equity. In addition, the statement of changes in shareholders'
equity shall present a line summing up all of the items included in the Report on Comprehensive Income, providing proper allocation between
the Company and the minority shareholders.
The revised Standards shall apply to financial statements of periods commencing on or after 1 January 2009. Early implementation is
allowed with disclosure of that fact required.
5. IFRS 3 (Revised) - Business Combinations
IFRS 3 (Revised) sets out the principles for the accounting treatment of business combinations. The Standard sets out, among other
things, the rules of measurement of contingent consideration in business combinations, which shall be measured as a derivative financial
instrument. Transaction costs, directly connected to business combinations, shall be immediately expensed.
Minority rights shall be measured at the date of the business combination in an amount equal to their share in the fair value of the assets
(including goodwill), liabilities and contingent liabilities of the acquired entity.
In respect of business combinations in which control is achieved after a number of purchases (acquisition in stages), the assets,
liabilities and contingent liabilities of the acquired company shall be measured at the fair value at the date that control was achieved,
with the difference carried to the profit and loss accounts.
The revised Standard shall apply to annual financial reporting periods commencing on or after 1 July 2009. Early implementation is allowed,
on condition that it is accompanied by the early adoption of IAS 27 (Revised).
6. IAS 27 (Revised) - Consolidated and Separate Financial Statements
IAS 27 (Revised) sets out the principles of accounting treatment in consolidated and separate financial statements. Among other things,
the Standard stipulates that transactions with minority shareholders, as part of which the Company holds control in a subsidiary prior to
and following the transaction, shall be accounted for as equity transactions.
When control is lost, the remaining investment (including goodwill) shall be adjusted to fair value as at that date and the increase or
decrease as a result of the remeasurement shall be included in the gain and loss deriving from the realization.
The share of the minority in the losses of a subsidiary, which exceed its share in shareholders' equity, shall be allocated to the minority,
ignoring its commitments and its ability to carry out additional investments in the subsidiary.
The revised Standard shall be applied retroactively except for a number of cases in which it is to be applied prospectively, in respect of
annual financial reporting periods commencing on or after 1 July 2009. Early implementation is allowed, on condition that it is accompanied
by the early adoption of IAS 3 (Revised).
At present, Group Management is unable to estimate the impact of the implementation of the standard on its financial position and the
results of its operations.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
Z. Summary of new financial reporting standards and clarification issued but not yet in effect, relevant to the operations of the
Company (cont.)
7. Improvements to IFRS - Revisions to International Standards
In May 2008, the IASB issued a series of revisions to a number of international standards. Most of the revisions will apply to
annual reporting periods commencing on or after 1 January 2009.
The Company has been assessing the possible consequences of these revisions on its financial statements.
8. IFRS 1, First time adoption of IFRS (Revised) and IAS 27, Consolidated Financial Statements (Revised)
According to the revision to IFRS 1 and IAS 27 (hereinafter - the "Revisions"), a first-time adopter of IFRS is permitted to use "deemed
cost" for purposes of presenting an investment in investee companies in the solo financial statements of the Company at the date of
transition to international standards. In addition, the first-time adopter must recognize dividends received in respect of an investment in
an investee company (subsidiary, affiliate or joint venture) in the profit and loss accounts.
The revision of the standards will apply to annual financial reporting periods commencing on or after 1 January 2009. Early adoption is
allowed subject to disclosure of the fact.
The Company has been assessing the possible consequences of these revisions on its financial statements.
9. IFRIC 15 - Agreements for construction of real estate
This clarification provides guidelines to determine whether agreements for the construction and sale of real estate are subject to IAS
18, Revenues (hereinafter - "IAS 18") and when they are subject to IAS 11, Construction Contracts (hereinafter - "IAS 11"). In addition, the
clarification provides clarifications regarding the point in time for recognition of revenue on the aforementioned contracts in accordance
with the principles of IAS 11 and IAS 18, respectively. In cases in which it was determined that the construction and sale agreement for
real estate is subject to IAS 18, the revenue is recognized in a manner similar to the sale of a product, and in cases in which it was
determined that the construction and sale agreement for real estate is subject to IAS 11, the revenue is recognized on the basis of the
percentage completed of the real estate asset.
The clarification applies to financial statements of annual financial reporting periods commencing on or after 1 January 2009 and will
be applied retrospectively. Early adoption is allowed subject to disclosure of the fact.
The Company believes that the clarification will not have a material impact on the results of operations, financial position and cash
flows of the Company.
10. IFRIC 16 - Net investment hedging in foreign operations
This clarification provides guidelines pertaining to the hedging of the investment of a company in foreign operations and addresses,
among other things, the following aspects:
- Hedging can be done for accounting purposes on the exposure to exchange rate risk deriving from the
difference between the functional currency of the reporting entity and the functional currency of the foreign
operations. A difference between the presentation currency of the reporting entity and the functional
currency of the foreign operations does not constitute a risk in respect of which hedging can be done for
accounting purposes.
- Regarding a group of companies, the clarification stipulates that each entity of the group is allowed to be the
one holding a hedge instrument.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
PREPARED ACCORDING TO IFRS (cont.)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.)
Z. Summary of new financial reporting standards and clarification issued but not yet in effect, relevant to the operations of the
Company (cont.)
10. IFRIC 16 - Net investment hedging in foreign operations (cont.)
- According to the clarification, amounts reclassified from equity to the profit and loss accounts in respect of
the hedged item shall be determined on the basis of the principles of IAS 39, Financial Instruments:
Recognition and Measurement, and the amounts reclassified from equity to the profit and loss accounts in respect of the foreign
operations shall be determined on the basis of the principles of IAS 21, the Effects of Changes in Foreign Currency Exchange Rates.
The clarification applies to the financial statements of annual financial reporting periods commencing on or after 1 October 2008 and
shall be applied retrospectively or prospectively, at the election of the reporting entity. The clarification applies to financial
statements of annual financial reporting periods commencing on or after 1 January 2009 and will be applied retrospectively. Early adoption
is allowed subject to disclosure of the fact..
The Company believes that the clarification will not have a material impact on the results of operations, financial position and cash
flows of the Company.
AA. Convenience translation
The financial statements at 30 June 2008 (including the profit and loss accounts and the balance sheets) have been translated into
Sterling using the representative exchange rate at that date (� 1 = NIS 6.67). The translation has been made solely for the convenience of
the reader. The amounts presented in these financial statements should not be construed to represent amounts receivable or payable in
Sterling or convertible into Sterling, unless otherwise indicated in these statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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