Key Points for Reporting Corporations about Disclosure of the Implications of the “Swords of Iron” War


On November 7, 2023, the Israeli Securities Authority (“ISA”) published guidelines and key points for reporting corporations regarding the required disclosure of the implications of the “Swords of Iron” War (the “War”) when issuing immediate reports and in connection with preparation of the periodical report for the third quarter of 2023. 

To review ISA’s guidelines please >> click here.

ISA Key Points for Immediate Reports:

With respect to publishing reports on the War’s impact on the business operations of reporting corporations, corporations whose business operations are or may be materially affected by the War must verify that due disclosure is made to investors by issuing an immediate report on the implications of the War on their business operations, including, among others, providing continuous and ongoing updates on material developments regarding an event that deviates from the corporation’s ordinary course of business and has or may have a material impact on the corporation, or on any event or matter that could significantly affect the price of the corporation’s securities, including, among others:

– Significant impairment of assets;

– Significant stoppage or closure of offices/operating sites; 

– Significant reduction in business operations or the roster of employees;

– Significant decline in the scope of sales, activities, orders, or market demand;

– Significant damage or difficulties in the supply chain/the marketing and distribution system/access to raw materials, and inventory/customers/suppliers;

– Significant harm to operational and functional continuity; 

– Cash flow problems, liquidity stress and reportable credit events;

– Significant cyber-security events;

– Significant credit losses with respect to customers. 

As part of the aforementioned report, the corporation must ensure that investors are provided with informative and up-to-date information that combines quantitative information with qualitative analysis of the main implications of the events of the War on its business operations, and the extent of the effect on the corporation’s operating continuity and financing position.

ISO Key Points for Q3/2023 Periodical Reports:

With respect to the publication of the periodical reporting for the third quarter of 2023, please find below several key points related to the disclosure that corporations are required to make regarding any business operations that are or may be significantly affected by the War, that corporations have to consider including in their periodical report:

1. General analysis of the effect of the War events on the corporation’s ongoing business activities: In the directors’ report – qualitative and quantitative analysis of the War events that have a significant effect on the corporation’s financial position, assets, results of operations; ability to maintain operational and function continuity; roster of employees; state of the business vis a vis customers, suppliers or service providers; analysis of the main operating and financial metrics used to assess performance in the corporation’s sector; effects on sources of financing and refinancing options; risks arising from the state of War; and the plans and actions that the corporation took or intends to take in order to mitigate these implications.

2. Sector based analysis of the effects of the War events on the corporation’s businesses (updating the chapter on the description of the corporation’s business included in the periodical report for the year 2022 and the periodical reports for the year 2023): Quantitative and qualitative information regarding the War events that have a significant effect on the corporation’s operations according to the sector in which the corporation operates. The information must include explanations about the developed and anticipated trends according to the corporation assessments that take into consideration the specific circumstances of the corporation and the sector in which it operates, for the reporting period and for the period from the reporting date to the publication date of the reports. The corporation must also include information on the plans and actions that the corporation took or intends to take to address those implications. 

3. Analysis of financing and financial position:

3.1. Disclosure of the financing and financial position in the directors’ report: The directors’ explanations for the War’s estimated effects on the corporation’s financial position, liquidity, financial strength, available sources of financing, and solvency. This disclosure should provide information on the key assumptions, discretion exercised, and various scenarios considered, which were used as the basis for the corporation’s assessments of its solvency.

3.2. Cash flow projection: The corporation is required to provide the basis and detail regarding the assumptions underlying the cash flow projection, with respect to the implications of the War.

3.3. Disclosure in the financial statements on the financial position and on-going concern assumption: When examining its financial position and the on-going concern assumption, emphasis should be given to the effects of the War on the corporation’s business. In its description of the effects of the War on the corporation’s business and its financial position, if those effects are or may become significant, the corporation must include qualitative and quantitative information that will allow the investor to understand those effects. For example, effects on the corporation’s compliance with its financial covenants, sources of financing that are available to the corporation and its ability to raise  additional sources of financing if needed, effects of the War on the results of its business operations, burn rate, etc. 

4. Events subsequent to the balance sheet date: The corporations are required to examine the events that occurred after the reporting period and their effect on the corporation, according to their individual circumstances, and specifically so with respect to the events of the War. Disclosure according to IAS 10 (“Events After the Reporting Period”) should be implemented, and an estimate of the corporation financial effects, if feasible.

The information noted in paragraphs 1-4 above must be accompanied by a qualitative and qualitative estimate of the effect of the events (if they can be reliably estimated) on the corporation’s business operations (e.g., damage to or suspended use of assets, provisions for credit losses, diminished revenues or profitability). 

*The review was written by Eitan Shmueli, partner and head of Capital Market & Securities Department, together with Adv. Ido Zburof.

*Disclaimer: The information provided above is solely intended for general informational purposes and should not be construed as legal advice. It does not substitute for a comprehensive and tailored review and assessment of each matter and corporation.