Neeman blocks IDB's 'creative' accounting on dividend payments

Neeman blocks IDB's 'creative' accounting on dividend payments Justice Minister Yaakov Neeman delivered a stinging blow to the IDB group's ability to distribute dividends when, just before the holiday weekend, he signed into force new regulations blocking the group's "creative" use of accounting rules. from NIS 2. 15 billion. Koor said the decision to direct its investment in Credit Suisse to other comprehensive income was because it intends to become a major Credit Suisse shareholder. The portion of this cumulative loss attributable to IDB Holding is NIS 1. Adopting the new IFRS accounting rule would have allowed IDB Holding to evade recognizing the cumulative NIS 2. The new regulations state that a company's capital surplus include capital losses from financial assets as they did according to accounting rules prior to the adoption of IFRS 9 in cases where these were recognized as a loss resulting from a significant and long-standing decrease in fair value of a financial asset. The decision was aimed at canceling the effect of the controversial IFRS 9 on a firm's dividend distributions and preventing financially-shaky companies from distributing earnings on the basis of "notional" profits which are not a result of any cash inflow and as such hadn't improved the company's liquidity position. By severing the link between accounting income and distributable capital surplus, the move is expected to counter incentives to use creative profit-boosting accounting techniques. The change in regulations is meant as a stopgap measure until legislation can be completed to adjust the Companies Law by changing the tests that determine if a company can decide on distributing dividends. Clal Industries and Investments of the IDB group of companies, for example, distributed a NIS 250 million dividend following a transaction in which Teva Pharmaceutical Industries invested $19 million in the shares of CureTech, an indirectly-owned Clal Industries subsidiary, to increase its holdings to 75%. Adopting IFRS 9 would have substantially improved IDB group's financial flexibility by reducing Koor's NIS 2. The directive instructs the board of directors to justify how the dividend distribution in such a case adheres to the profit test - and the solvency test in particular, which permits a profit distribution only where there's no reasonable doubt that this would compromise the company meeting its financial liabilities. 35 billion. IDB estimated that the overall effect of adopting IFRS 9 would be the reduction of its negative surplus position as of January 1, 2012, by NIS 1. IDB is controlled by Nochi Dankner, who also chairs the group. IDB noted in its 2011 financial statements that the early adoption of IFRS 9 would lead to canceling recognition by subsidiary Koor of its NIS 2. In its fourth quarter financial statements, the IDB group announced its intent toward the early adoption of IFRS 9, beginning January 2012. This was distributed in full as a dividend, despite not one cent from the transaction having gone into the company's coffers - and even despite the theoretical possibility that CureTech, a biotech startup, will fail to develop a marketable product and close its doors. Eventually, though, the company let the cat out of the bag by pointing out that the choice of directing the investment to other comprehensive income would expand its surplus base. The negative reserves on IDB Holding's books at the end of 2011 totaled NIS 2. Neeman blocks IDB's 'creative' accounting on dividend payments Trade News selected by Local Linkup on 11/04/2012