The Impact of ISA’s XBRL Mandate on Corporate Financial Reporting in Israel

“In today’s digital era, financial transparency isn’t just a virtue—it’s a necessity. According to the World Bank, more than 60% of countries have adopted eXtensible Business Reporting Language (XBRL) to enhance the accessibility and reliability of financial information.”

This blog aims to explore the significant impact of the Israel Securities Authority’s (ISA) XBRL mandate on corporate financial reporting in Israel, examining both the benefits and the challenges faced by companies in this transition.

Israel takes another step towards full XBRL-based digital reporting this week, as the Israel Securities Authority (ISA) dropped requirements to publish financial reports in PDF format. As of this week, entities can select whether to publish their reports in PDF or Inline XBRL format, with the eventual aim being a transition to full mandatory iXBRL reporting in the coming years.

The ISA announced the move to iXBRL reporting in 2019, as part of a series of measures designed to establish an attractive and innovative public capital market that will appeal to global investors. ISA eventually aims to completely phase out PDF disclosures, facilitating investor access to data and increasing the transparency and attractiveness of Israeli markets.

Israeli enterprises are no strangers to digital reporting: ISA has been using XBRL for some years, and has enabled Inline XBRL submissions on a voluntary basis to encourage companies to begin the transition with their annual reports for 2021. As ISA seeks an eventual mandate for Inline XBRL, early adoption is an attractive option for companies seeking to get ahead of the curve and ensure smooth evolution of their reporting processes. For vendors, there is also an opportunity to provide software solutions.

The Inline XBRL format is fast becoming the international gold standard for high-quality digital regulatory reporting using the International Financial Reporting Standards (IFRS). It combines human- and machine-readability in a single document, directly and tightly linking the information the reader sees with the digital tags that enable timely and sophisticated data analysis. In implementing Inline XBRL, the ISA seeks to phase out ‘dual filing’ of parallel PDF and digital disclosures, facilitate investor access to data, and continue to ensure the visibility and attractiveness of Israeli markets.

Understanding the ISA’s XBRL Mandate

• Background of ISA

Role and Responsibilities of the Israel Securities Authority (ISA)
The Israel Securities Authority (ISA) regulates Israel’s securities market, ensuring its proper functioning and protecting investors. Established in 1968, its main responsibilities include :
1. Regulation and Supervision : Overseeing companies listed on the Tel Aviv Stock Exchange (TASE).
2. Investor Protection : Ensuring investors have access to accurate and timely information.
3. Enforcement : Investigating and acting against securities law violations.
4. Policy Development : Creating policies to promote market transparency and efficiency.
5. Public Education : Promoting financial literacy among the public.

Historical Context of Financial Reporting Regulations in Israel

Financial reporting regulations in Israel have evolved significantly :
1. Pre-1990s : Basic financial statements with minimal oversight.
2. 1990s : Adoption of International Financial Reporting Standards (IFRS) began, increasing standardization.
3. 2000s : Strengthened reporting and corporate governance, mandatory IFRS adoption in 2008.
4. 2010s : Focus on transparency with improved disclosure requirements.
5. Recent Years : ISA mandated XBRL for financial reporting, modernizing the reporting infrastructure for better data accessibility and transparency.

Specific Requirements for XBRL Reporting by the Israel Securities Authority (ISA)

The ISA mandates XBRL reporting with specific requirements :
• XBRL Taxonomy : Use ISA-approved tags for financial data.
• Data Accuracy : Ensure accuracy and consistency in reported XBRL data.
• Electronic Submission : Submit annual and quarterly reports electronically in XBRL format.
• Disclosure : Promptly disclose significant financial events in XBRL.
• Compliance Verification : Data may undergo auditing for ISA compliance.

Submission of Individual Inline XBRL reports via MAGNA :
To peruse individual Inline XBRL reports via Magna, simply click on a report as shown here :

Timeline and Scope of the Mandate

• Timeline : ISA sets deadlines for phased implementation and ongoing XBRL reporting compliance.
• Scope : Primarily affects publicly listed companies on the Tel Aviv Stock Exchange (TASE) for annual, quarterly, and significant event disclosures.

Scope of the ISA’s XBRL Mandate
The ISA’s XBRL mandate primarily affects :
• Companies : Publicly listed companies on the Tel Aviv Stock Exchange (TASE).
• Financial Reports : Mandatory XBRL reporting includes annual financial statements, quarterly reports, and disclosures of significant events.

Potential Positive Impacts on the Israeli Economy
XBRL adoption in Israel can :
• Boost Market Transparency : Attract investors and increase market confidence.
• Reduce Costs : Streamline reporting processes and lower compliance costs.
• Drive Innovation : Encourage innovation in financial services and technology sectors.
• Improve Regulatory Efficiency : Simplify compliance and enhance regulatory oversight.

Global Trends
Comparison with XBRL Adoption in Other Countries

XBRL adoption globally has shown benefits such as standardized reporting, efficiency gains, and improved regulatory compliance.

Israel’s Adoption of XBRL and Global Financial Reporting Trends

Israel’s adoption of XBRL aligns with global trends by enhancing transparency, facilitating cross-border comparisons, and supporting regulatory modernization efforts. This move reflects a commitment to international standards and improving financial reporting efficiency.

Conclusion
The ISA’s XBRL mandate represents a significant advancement in Israeli corporate financial reporting, promising increased transparency and efficiency. Embracing XBRL will empower Israeli companies to thrive in the global economy.

Call to Action

Prepare for XBRL implementation :
• Invest in XBRL-enabled tools and training.
• Align with ISA guidelines and regulatory updates.
• Seek expert consultation for smooth integration.

Additional Resources
• Links to Relevant Articles
– Provide links to in-depth articles and resources on XBRL and financial reporting, including XBRL.org’s announcement on Israel’s transition to XBRL and related posts on the XBRL.org ISA tag.