Consolidated Financial Statements as of December 31, 2022 |
Page | ||
Report of Independent Registered Public Accounting Firm (PCAOB id: 1309) | F-2 | |
Report of Independent Registered Public Accounting Firm (PCAOB id: 1057) | F-4 | |
F-5 | ||
F-7 | ||
F-8 | ||
F-9 | ||
F-10 |
/s/ Kesselman & Kesselman |
Certified Public Accountants (Isr.) |
A member firm of PricewaterhouseCoopers International Limited |
Tel-Aviv, Israel |
March 20, 2023 |
/s/ Somekh Chaikin |
Member Firm of KPMG International We have served as the Company’s auditor since 1997 to 2021. |
Tel Aviv, Israel |
March 15, 2021 |
Consolidated Balance Sheets as of December 31
|
2021
|
2022
|
|||||||||||
Note
|
US$ thousands
|
US$ thousands
|
||||||||||
Assets
|
||||||||||||
Current assets
|
||||||||||||
Cash and cash equivalents
|
3
|
|
|
|||||||||
Marketable securities
|
2F, 4
|
|
|
|||||||||
Accounts receivable:
|
||||||||||||
Trade, net
|
2G
|
|
|
|||||||||
Other
|
5
|
|
|
|||||||||
Inventories
|
6
|
|
|
|||||||||
Total current assets
|
|
|
||||||||||
Marketable securities
|
2F, 4
|
|
|
|||||||||
Assets held for employees' severance benefits
|
11
|
|
|
|||||||||
Deferred tax assets
|
15G
|
|
|
|||||||||
Property, plant and equipment, net
|
7
|
|
|
|||||||||
Intangible assets, net
|
8
|
|
|
|||||||||
Operating leases right-of-use, net
|
10
|
|
|
|||||||||
Goodwill
|
|
|
||||||||||
Total assets
|
|
|
Avi Eizenman
|
Liron Eizenman
|
Eran Gilad
|
||
Chairman of the Board of Directors
|
Chief Executive Officer
|
Chief Financial Officer
|
Consolidated Balance Sheets as of December 31 (Continued)
|
2021
|
2022
|
|||||||||||
Note
|
US$ thousands
|
US$ thousands
|
||||||||||
Liabilities and shareholders' equity
|
||||||||||||
Current liabilities
|
||||||||||||
Trade accounts payable
|
|
|
||||||||||
Other accounts payable and accrued expenses
|
9
|
|
|
|||||||||
Operating lease liabilities
|
10
|
|
|
|||||||||
Total current liabilities
|
|
|
||||||||||
Long-term liabilities
|
||||||||||||
Operating lease liabilities
|
10
|
|
|
|||||||||
Liability for employees' severance benefits
|
11
|
|
|
|||||||||
Deferred tax liabilities
|
15G
|
|
|
|||||||||
Total liabilities
|
|
|
||||||||||
Shareholders' equity
|
12
|
|||||||||||
Ordinary shares, ILS
|
||||||||||||
|
|
|
||||||||||
Additional paid-in capital
|
|
|
||||||||||
Treasury shares (at cost)
|
(
|
)
|
(
|
)
|
||||||||
Retained earnings
|
|
|
||||||||||
Total shareholders' equity
|
|
|
||||||||||
Total liabilities and shareholders’ equity
|
|
|
Consolidated Statements of Operations for the Year Ended December 31
|
2020
|
2021
|
2022
|
||||||||||||||
US$ thousands
|
||||||||||||||||
Note
|
Except for share and per share data
|
|||||||||||||||
Sales
|
2N, 13
|
|
|
|
||||||||||||
Cost of sales
|
|
|
|
|||||||||||||
Gross profit
|
|
|
|
|||||||||||||
Operating expenses
|
||||||||||||||||
Research and development
|
|
|
|
|||||||||||||
Sales and marketing
|
|
|
|
|||||||||||||
General and administrative
|
|
|
|
|||||||||||||
Total operating expenses
|
|
|
|
|||||||||||||
Operating income
|
|
|
|
|||||||||||||
Financial income, net
|
14
|
|
(
|
)
|
|
|||||||||||
Income before income taxes
|
|
|
|
|||||||||||||
Income taxes
|
15
|
|
|
|
||||||||||||
Net income
|
|
|
|
|||||||||||||
Income per share:
|
||||||||||||||||
Basic income per ordinary share (US$)
|
2U
|
|
|
|
|
|||||||||||
Diluted income per ordinary share (US$)
|
|
|
|
|||||||||||||
Weighted average number of ordinary shares used to compute basic income per share (in thousands)
|
|
|
|
|||||||||||||
Weighted average number of ordinary shares used to compute diluted income per share (in thousands)
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Changes in Shareholders' Equity
|
Ordinary shares
|
Additional paid-in capital
|
Treasury shares(3)
|
Retained earnings
|
Total shareholders’ equity
|
||||||||||||||||||||
Number
of shares(1)
|
US$ thousands
|
|||||||||||||||||||||||
Balance at January 1, 2020
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||
Exercise of options and RSUs(2)
|
|
*
|
|
|
|
|
||||||||||||||||||
Purchase of treasury shares
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
Share-based compensation
|
-
|
|
|
|
|
|
||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2020
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||
Purchase of treasury shares
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
Reissuance of treasury shares under share-based compensation plan
|
|
*
|
|
|
|
|
||||||||||||||||||
Share-based compensation
|
-
|
|
|
|
|
|
||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2021
|
|
|
|
(
|
)
|
|
|
|||||||||||||||||
Purchase of treasury shares
|
(
|
)
|
|
|
(
|
)
|
|
(
|
)
|
|||||||||||||||
Reissuance of treasury shares under share-based compensation plan
|
|
|
(
|
)
|
|
(
|
)
|
|
||||||||||||||||
Share-based compensation
|
-
|
|
|
|
|
|
||||||||||||||||||
Net income
|
-
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2022
|
|
|
|
(
|
)
|
|
|
(1)
|
|
||||||
(2)
|
|
||||||
(3)
|
Company shares held by the Company. Presented as a reduction of equity at their cost to the Company.
The treasury shares have no rights.
|
||||||
*
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 8
Consolidated Statements of Cash Flows for the Year Ended December 31
|
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Cash flows from operating activities
|
||||||||||||
Net income
|
|
|
|
|||||||||
Adjustments required to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
|
|
|
|||||||||
Impairment of intangible assets
|
|
|
|
|||||||||
Write-down of obsolete inventory
|
|
|
|
|||||||||
Changes in marketable securities
|
|
|
|
|
(
|
)
|
||||||
Share-based compensation expense
|
|
|
|
|||||||||
Deferred taxes, net
|
(
|
)
|
|
|
||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts receivable - trade
|
|
(
|
)
|
|
||||||||
Accounts receivable - other
|
(
|
)
|
|
|
||||||||
Change in liability for employees' severance benefits, net
|
|
|
|
|||||||||
Inventories
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Trade accounts payable
|
(
|
)
|
|
(
|
)
|
|||||||
Other accounts payable and accrued expenses
|
|
|
(
|
)
|
||||||||
Net cash provided by (used in) operating activities
|
|
|
(
|
)
|
||||||||
Cash flows from investing activities
|
||||||||||||
Proceeds from short term bank deposits, net
|
|
|
|
|||||||||
Purchase of property, plant and equipment
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Investment in intangible assets
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Proceeds from maturity of marketable securities
|
|
|
|
|||||||||
Purchases of marketable securities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Other
|
||||||||||||
Net cash provided by investing activities
|
|
|
|
|||||||||
Cash flows from financing activities
|
||||||||||||
Exercise of options
|
|
|
|
|||||||||
Purchase of treasury shares
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Proceeds from reissuance of treasury shares upon exercise of options
|
|
|
|
|||||||||
Net cash used in financing activities
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Effect of exchange rate changes on cash balances held
|
|
|
(
|
)
|
||||||||
Increase in cash and cash equivalents
|
|
|
|
|||||||||
Cash and cash equivalents at beginning of year
|
|
|
|
|||||||||
Cash and cash equivalents at end of year
|
|
|
|
|||||||||
Supplementary cash flow information
|
||||||||||||
A. Non-cash transactions:
|
||||||||||||
Recognition of right of use assets and lease liabilities
|
|
|
|
|||||||||
Investments in property, plant and equipment
|
|
|
|
|||||||||
|
|
|
||||||||||
B. Cash paid (received) during the year for:
|
||||||||||||
Income taxes
|
|
|
(
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
F - 9
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
The significant accounting policies, which are applied consistently throughout the periods presented, are as follows:
A. |
Financial statements in US dollars
|
B. |
Basis of presentation |
F - 10
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
C. |
Estimates and assumptions |
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include revenue recognition over time, credit loss, income taxes, impairment of inventories, marketable securities, impairment of goodwill, intangible assets and the assumptions used to estimate the fair value of share-based compensation.
D. |
Cash and cash equivalents |
E. |
Short-term bank deposits |
F. |
Marketable securities |
The Company recognizes current expected credit losses for financial assets held at amortized cost. The Company uses forward-looking information to calculate credit loss estimates.
F - 11
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
G. |
Trade accounts receivable, net |
The Company presents accounts receivable in the consolidated balance sheets net of allowance for expected credit losses for potential uncollectible amounts. The Company estimates the collectability of accounts receivable balances and adjust the allowance for expected credit losses based on the Company's assessment of collectability by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when it identifies specific customers with known disputes or collectability issues. The Company also considers a number of factors to assess collectability, including the past due status, creditworthiness of the specific customer, payment history and reasonable and supportable forecasts of future economic conditions.
H. |
Inventories
|
I. |
Assets held for employees’ severance benefits
|
J. |
Property, plant and equipment |
|
%
|
Machinery and equipment
|
|
Office furniture and equipment
|
|
Leasehold improvements
|
|
*
|
Over the shorter term of the lease or the useful life of the asset
|
F - 12
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
K. |
Goodwill and other intangible assets |
The Company performs its quantitative goodwill impairment test by comparing the fair value of its reporting unit with its carrying value. If the reporting unit’s carrying value is determined to be greater than its fair value, an impairment charge is recognized for the amount by which the carrying value exceeds the reporting unit’s fair value. If the fair value of the reporting unit is determined to be greater than its carrying amount, the applicable goodwill is not impaired.
Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in amortization of such intangible assets in the straight-line method.
For the years ended December 31, 2020, 2021 and 2022, no impairment losses were recorded.
L. |
Impairment of long-lived assets |
F - 13
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
M. |
Leases |
After lease commencement, the Company measures the lease liability at the present value of the remaining lease payments using the discount rate determined at lease commencement (as long as the discount rate hasn’t been updated as a result of a reassessment event). The Company subsequently measures the ROU asset at the present value of the remaining lease payments, adjusted for the remaining balance of any cumulative prepaid or accrued rent if the lease payments are uneven throughout the lease term.
The Company’s lease agreements have remaining lease terms of
F - 14
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
N. |
Revenue recognition
|
O. |
Cost of sales
|
P. |
Research and development costs and capitalized software development costs
|
F - 15
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
Q. |
Allowance for product warranty |
R. |
Treasury shares |
S. |
Income taxes |
T. |
Share-based compensation |
F - 16
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 2 - Summary of significant Accounting Policies (cont’d)
U. |
Basic and diluted earnings per share |
The following table summarizes information related to the computation of basic and diluted income per ordinary share for the years indicated.
|
|
Year ended December 31
|
|
|||||||||
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|||
Net income attributable to ordinary shares (US$ thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in basic income per ordinary share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add of outstanding dilutive potential ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding
used in diluted income per ordinary share calculation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per ordinary shares (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income per ordinary shares (US$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares related to options and RSUs excluded from
the diluted earnings per share calculation because of anti-dilutive effect
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 17
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
V. |
Comprehensive Income |
W. |
Fair Value Measurements |
F - 18
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
X. |
Concentrations of risks |
Y. |
Liabilities for loss contingencies |
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
||
Cash
|
|
|
|
|
|
|
|
|
Cash equivalents *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
F - 19
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Gross
|
Gross
|
|||||||||||||||
unrealized
|
unrealized
|
|||||||||||||||
Amortized
|
holding
|
holding
|
Aggregate
|
|||||||||||||
cost basis**
|
gains
|
(losses)
|
fair value*
|
|||||||||||||
US$ thousands
|
||||||||||||||||
At December 31, 2022
|
||||||||||||||||
Held to maturity:
|
||||||||||||||||
Corporate debt securities and government debt securities
|
||||||||||||||||
Current
|
|
|
(
|
)
|
|
|||||||||||
Non-Current (1 to 3 years)
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
||||||||||||
At December 31, 2021
|
||||||||||||||||
Held to maturity:
|
||||||||||||||||
Corporate debt securities and government debt securities
|
||||||||||||||||
Current
|
|
|
(
|
)
|
|
|||||||||||
Non-Current (1 to 4 years)
|
|
|
(
|
)
|
|
|||||||||||
|
|
(
|
)
|
|
*
|
|
**
|
|
|
The accrued interest is presented as part of other receivables on the balance sheet.
|
F - 20
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 4 - Marketable Securities (Cont’d)
Activity in marketable securities in 2022
|
US$ thousands
|
|||
Balance at January 1, 2021
|
|
|||
Purchases of marketable securities
|
|
|||
Changes in marketable securities, net |
(
|
)
|
||
Proceeds from maturity of marketable securities
|
(
|
)
|
||
Balance at January 1, 2022
|
|
|||
Purchases of marketable securities
|
|
|||
Changes in marketable securities, net |
(
|
)
|
||
Proceeds from maturity of marketable securities
|
(
|
)
|
||
Balance at December 31, 2022
|
|
Less than 12 months
|
12 months or more
|
Total
|
||||||||||||||||||||||
Unrealized Losses
|
Fair value
|
Unrealized Losses
|
Fair value
|
Unrealized Losses
|
Fair value
|
|||||||||||||||||||
Held to maturity:
|
||||||||||||||||||||||||
Corporate debt securities and government debt securities
|
(
|
)
|
|
(
|
)
|
|
(
|
)
|
|
F - 21
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
||
Advances to suppliers
|
|
|
|
|
|
|
|
|
Government authorities
|
|
|
|
|
|
|
|
|
Prepaid expense
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
||
Raw materials and components
|
|
|
|
|
|
|
|
|
Products in process
|
|
|
|
|
|
|
|
|
Finished products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the years ended December 31, 2020, 2021 and 2022, the Company recorded inventory write-downs in the amount of US$
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
|
|
|
|
|
|
|
Office furniture and equipment
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(
|
)
|
|
|
(
|
)
|
|
|
|
|
|
|
|
|
|
Property, Plant and equipment, net
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2020, 2021 and 2022 were US$
F - 22
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
December 31
|
||||||||||||
2021
|
2022
|
|||||||||||
Useful life
|
US$ thousands
|
|||||||||||
Original cost:
|
||||||||||||
Capitalization of software development costs
|
|
|
|
|||||||||
Licenses
|
|
|
|
|||||||||
|
|
|||||||||||
Accumulated amortization:
|
||||||||||||
Capitalization of software development costs
|
|
|
||||||||||
Licenses
|
|
|
||||||||||
|
|
|||||||||||
Intangible assets, net:
|
||||||||||||
Capitalization of software development costs
|
|
|
||||||||||
Licenses
|
|
|
||||||||||
|
|
Note 9 - Other accounts payable and accrued expenses
|
December 31
|
||||||||
2021
|
2022
|
|||||||
US$ thousands
|
||||||||
Accrued expenses
|
|
|
||||||
Employee benefits
|
|
|
||||||
Government authorities
|
|
|
||||||
Other payables
|
|
|
||||||
|
|
F - 23
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A.
|
The components of operating lease cost for the year ended December 31, 2020, 2021 and 2022 were as follows:
|
Year ended
December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Operating lease costs (mainly plant and offices)
|
|
|
|
|||||||||
Variable lease payments not included in the lease liability
|
|
|
|
|||||||||
Short-term lease cost
|
|
|
|
|||||||||
Total operating lease cost
|
|
|
|
B.
|
Supplemental cash flow information related to operating leases was as follows:
|
Year ended
December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||||||
Operating cash flows from operating leases
|
|
|
|
|||||||||
Right-of-use assets obtained in exchange for lease liabilities (non-cash):
|
||||||||||||
Operating leases
|
|
|
|
C. Supplemental balance sheet information related to operating leases was as follows:
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
|
|
Operating leases:
|
|
|
|
|
|
|
|
|
Operating leases right-of-use
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current operating lease liabilities
|
|
|
|
|
|
|
|
|
Non-current operating lease liabilities
|
|
|
|
|
|
|
|
|
Total operating lease liabilities
|
|
|
|
|
|
|
|
|
F - 24
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
|
|
December 31
|
|
|||||
|
|
2021
|
|
|
2022
|
|
||
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term (years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate
|
|
|
|
%
|
|
|
|
%
|
|
|
December 31,
2022
|
|
|
|
|
US$ thousands
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
2024
|
|
|
|
|
2025
|
|
|
|
|
2026
|
|
|
|
|
After 2026
|
|
|
|
|
Total operating lease payments
|
|
|
|
|
Less: imputed interest
|
|
|
(
|
)
|
Present value of lease liabilities
|
|
|
|
|
F - 25
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
Under Israeli law and labor agreements, Silicom is required to make severance payments to retired or dismissed employees and to employees leaving employment in certain other circumstances.
|
B. |
According to Section 14 to the Severance Pay Law ("Section 14") the payment of monthly deposits by a company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to the employees that have entered into agreements with the company pursuant to such Section 14. Commencing July 1, 2008, the Company has entered into agreements with a majority of its employees in order to implement Section 14. Therefore, as of that date, the payment of monthly deposits by the Company into recognized severance and pension funds or insurance policies releases it from any additional severance obligation to those employees that have entered into such agreements and therefore the Company incurs no additional liability since that date with respect to such employees. Amounts accumulated in the pension funds or insurance policies pursuant to Section 14 are not supervised or administrated by the Company and therefore neither such amounts nor the corresponding accrual are reflected in the balance sheet.
|
C. |
Consequently, the assets held for employees' severance benefits reported on the balance sheet, in respect of deposits for those employees who have signed agreements pursuant to Section 14, represent the redemption value of deposits made through June 30, 2008. The liability for employee severance benefits, with respect to those employees, represents the liability of the Company for employees' severance benefits as of June 30, 2008.
|
D. |
Expenses recorded with respect to employees' severance payments for the years ended December 31, 2020, 2021 and 2022, mainly attributed to Section 14, were US$
|
F - 26
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
On October 21, 2013 the Board resolved to adopt the Global Share Incentive Plan (2013) (the "2013 Plan") and to reserve up to
|
|
B. |
Options or RSUs granted to Israeli residents may be granted under Section 102 of the Israeli Income Tax Ordinance pursuant to which the awards of options, or the ordinary shares issued upon their exercise, must be deposited with a trustee for at least two years following the date of grant. Under Section 102, any tax payable by an employee from the grant or exercise of the awards is deferred until the transfer of the awards or ordinary shares by the trustee to the employee or upon the sale of the awards or ordinary shares.
|
|
Capital gains on awards granted under the plans are subjected to tax of
|
||
Gains which are not capital gains on awards under the plans are subjected to regular tax rates on individuals, and the Company is entitled to a tax deduction for such gains.
|
F - 27
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
C. |
During 2017, 2020 and 2022, the Company granted
|
1. |
The vesting period of the RSUs ranges between
|
|
2. |
The fair value of RSUs is estimated based on the market value of the Company’s stock on the date of grant, less an estimate of dividends that will not accrue to RSUs holders prior to vesting. |
|
3. |
The Company recognizes compensation expenses on these RSUs based on estimated grant date fair value, with the following assumptions:
|
2017
|
2020
|
2022 | |
Expected dividend yield
|
|
|
F - 28
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
D. |
On January 31, 2019, the Company granted, in the aggregate,
|
1. |
The exercise price for the options (per ordinary share) was US$
|
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions: |
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 29
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
E. |
On June 8, 2020, the Company granted, in the aggregate,
|
1. |
The exercise price for the options (per ordinary share) was US$
|
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions: |
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 30
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
F. |
On June 3, 2021, the Company granted, in the aggregate,
|
1. |
The exercise price for the options (per ordinary share) was US$
|
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Binomial option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 31
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
G. |
On January 27, 2022, the Company granted, in the aggregate,
|
1. |
The exercise price for the options (per ordinary share) was US$
|
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 32
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
H. |
On June 7, 2022, the Company granted, in the aggregate,
|
1. |
The exercise price for the options (per ordinary share) was US$
|
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 33
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
I. |
On July 1, 2022, the Company granted, in the aggregate, |
1. |
The exercise price for the options (per ordinary share) was US$ |
|
2. |
The Company recognizes compensation expenses on these options based on estimated grant date fair value using the Monte Carlo option-pricing model with the following assumptions:
|
|
Average Risk-free interest rate (a)
|
|
Expected dividend yield
|
|
Average expected volatility (b)
|
|
Termination rate |
|
Suboptimal factor (c)
|
|
(a)
|
Risk-free interest rate represents risk free US$ zero-coupon US Government Bonds at time of grant.
|
(b)
|
Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the NASDAQ National Market.
|
(c)
|
Suboptimal factor represents the multiple of the increase in the market share price on the day of grant of the option which, should it come to pass, will lead to exercise of the option by the employee. It is the average suboptimal factor of the Company and similar companies.
|
F - 34
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
J. |
The following table summarizes information regarding stock options as at December 31, 2022: |
Options outstanding
|
Options exercisable
|
||||||||||||||||
Weighted average
|
Weighted average
|
||||||||||||||||
remaining
|
remaining
|
||||||||||||||||
Exercise price
|
Number
|
contractual life
|
Number
|
contractual life
|
|||||||||||||
US$
|
of options
|
(in years)
|
of options
|
(in years)
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
|
|
The aggregate intrinsic value of options outstanding as of December 31, 2021 and 2022 is US$
The aggregate intrinsic value of options exercisable as of December 31, 2021 and 2022 is US$
The total intrinsic value of options exercised during the year ended December 31, 2021 and 2022, is US$
F - 35
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
K. |
The stock option activity under the abovementioned plans is as follows: |
Weighted
|
||||||||||||
Weighted
|
average
|
|||||||||||
Number
|
average
|
grant date
|
||||||||||
of options
|
exercise price
|
fair value
|
||||||||||
US$
|
US$
|
|||||||||||
Balance at January 1, 2020
|
|
|||||||||||
Granted
|
|
|
|
|||||||||
Exercised
|
(
|
)
|
|
|
||||||||
Forfeited
|
(
|
)
|
|
|
||||||||
Balance at December 31, 2020
|
|
|||||||||||
Granted
|
|
|
|
|||||||||
Exercised
|
(
|
)
|
|
|
||||||||
Forfeited
|
(
|
)
|
|
|
||||||||
Balance at December 31, 2021
|
|
|||||||||||
Granted
|
|
|
|
|||||||||
Exercised
|
(
|
)
|
|
|
||||||||
Forfeited
|
(
|
)
|
|
|
||||||||
Balance at December 31, 2022
|
|
|||||||||||
Exercisable at December 31, 2022
|
|
F - 36
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
L. |
The Restricted Share Units activity under the abovementioned plans is as follows: |
Weighted
|
||||||||
Number of
|
average
|
|||||||
Restricted
|
grant date
|
|||||||
Share Units
|
fair value
|
|||||||
US$
|
||||||||
Balance at January 1, 2020
|
|
|||||||
Granted
|
|
|
||||||
Vested
|
(
|
)
|
|
|||||
Balance at December 31, 2020
|
|
|||||||
Granted
|
|
|
||||||
Vested
|
|
|
||||||
Balance at December 31, 2021
|
|
|||||||
Granted
|
|
|
||||||
Forfeited
|
(
|
)
|
|
|||||
Vested
|
(
|
)
|
|
|||||
Balance at December 31, 2022
|
|
F - 37
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 12 - Shareholders' Equity (cont'd)
M. |
During 2020, 2021 and 2022, the Company recorded share-based compensation expenses. The following summarizes the allocation of the stock-based compensation expenses: |
Year ended December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Cost of sales
|
|
|
|
|||||||||
Research and development costs
|
|
|
|
|||||||||
Selling and marketing expenses
|
|
|
|
|||||||||
General and administrative expenses
|
|
|
|
|||||||||
|
|
|
F - 38
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A.
|
Information on sales by geographic distribution:
|
The Company has one operating segment.
|
Sales are attributed to geographic distribution based on the location of the ultimate customer:
|
Year ended December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
USA
|
|
|
|
|||||||||
North America - other
|
|
|
|
|||||||||
Israel
|
|
|
|
|||||||||
Europe
|
|
|
|
|||||||||
Asia-Pacific
|
|
|
|
|||||||||
|
|
|
B. Sales to single ultimate customers exceeding 10% of sales (US$ thousands):
|
|
Year ended December 31
|
|
|||||||||
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|||
|
|
US$ thousands
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|||
Customer "A"
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer "B"
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer "C"
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 39
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 13 - Geographic areas and major customers (cont'd)
C. Information on Long-Lived Assets - Property, Plant and Equipment and ROU assets by geographic areas:
|
|
Year ended December 31
|
|
|||||
|
|
2021
|
|
|
|
2022
|
|
|
|
|
US$ thousands
|
|
|||||
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
|
|
|
|
|
Europe
|
|
|
|
|
|
|
|
|
Israel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 40
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 14 - Financial Income (Expenses), Net
Year ended December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Interest income
|
|
|
|
|||||||||
Changes in marketable securities, net |
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Exchange rate differences, net
|
(
|
)
|
(
|
)
|
|
|||||||
Bank charges
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
|
(
|
)
|
|
F - 41
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
A. |
Measurement of results for tax purposes under the Israeli Income Tax Regulations (Rules for Maintaining Accounting Records of Foreign Invested Companies and Certain Partnerships and Determining Their Taxable Income) - 1986
|
|
As a "foreign invested company" (as defined in the Israeli Law for the Encouragement of Capital Investments-1959), the taxable income or loss and the tax basis of assets and liabilities of the Company’s Israeli operations are denominated in US Dollars.
|
||
B. |
Corporate tax rate in Israel
|
|
The regular corporate tax rate applied to taxable income of Israeli companies is
|
||
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law")
|
1. |
On December 29, 2010 the Knesset approved the Economic Policy Law for 2011-2012, which includes an amendment to the Law for the Encouragement of Capital Investments – 1959 (hereinafter – "the Amendment to the Law"). The Amendment to the Law is effective from January 1, 2011 and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a Preferred Company, per the definition of these terms in the Amendment to the Law.
|
|
Companies can choose to not be included in the scope of the Amendment to the Law and to stay in the scope of the law before its amendment until the end of the benefits period.
Under the Amendment to the Law, upon an irrevocable election made by a company, a uniform corporate tax rate will apply to all preferred income of such company. The Company elected to apply the uniform corporate tax rate as of 2014. From 2017 onwards, the uniform tax rate is to be
Should the Company derive income from sources other than the Preferred Company, such income will be taxable at the regular corporate tax rates for the applicable year.
|
F - 42
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 15 - Taxes on Income (cont’d)
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)
|
On December 29, 2016 the Israeli Parliament (the "Knesset") enacted the "Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016" in which the Law was also amended (hereinafter: “the Amendment”). The Amendment added new tax benefit tracks for a “preferred technological enterprise” and a “special preferred technological enterprise” which award reduced tax rates to a technological industrial enterprise for the purpose of encouraging activity relating to the development of qualifying intangible assets.
The benefits will be awarded to a “preferred company” that has a “preferred technological enterprise” or a “special preferred technological enterprise” with respect to taxable “preferred technological income” per its definition in the Law.
Preferred technological income that meets the conditions required in the law, will be subject to a reduced corporate tax rate of
On June 14, 2017 the Knesset Finance Committee approved "Encouragement of Capital Investment Regulations (Preferred Technological Income and Capital Gain of Technological Enterprise) – 2017" (hereinafter: “the Regulations”), which provides rules for applying the “preferred technological enterprise” and “special preferred technological enterprise” tax benefit tracks, including the Nexus formula that provides the mechanism for allocating the technological income eligible for the benefits.
Should the Company derive income from sources other than the “preferred technological enterprise”, such income will be taxable at the "Preferred Company" tax rate (for manufacturing activity in Israel) or regular corporate tax rates for the applicable year.
As a result of the aforesaid legislation, starting 2021 the Company implement the “preferred technological enterprise” tax benefit track.
|
F - 43
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 15 - Taxes on Income (cont’d)
C. |
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (hereinafter - the "Law") (cont'd)
|
2.
|
In the event of distribution by the Company of dividends out of its retained earnings that were generated prior to the 2014 tax year and were tax exempt under the "Approved Enterprise" or "Benefited Enterprise" status, the Company would be subjected to a maximum of
|
|
Out of the Company’s retained earnings as of December 31, 2022, approximately US$
|
||
On November 15, 2021, the Israeli Parliament released its 2021-2022 Budget Law (“2021 Budget Law”). The 2021 Budget Law introduces a new dividend ordering rule that apportions every dividend between previously tax-exempt and previously taxed income. Consequently, distributions (including deemed distributions as per Section 51(h)/51B of the Investment Law) may entail additional corporate tax liability to the distributing company. Effective August 15, 2021, dividend distributions will be treated as if made on a pro-rata basis from all types of earnings, including Exempt Profits. If such tax-exempt income is distributed, it would be taxed at the reduced corporate tax rate applicable to such income. |
F - 44
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
D. |
Taxation of the subsidiaries |
1. |
The subsidiary Silicom Inc. files tax returns with US federal tax authorities and with state tax authorities in the states of New Jersey, California, Virginia, New York, New Mexico, Tennessee, Texas and Illinois.
The federal corporate income tax rate is
|
|
2. |
The subsidiary Silicom Denmark is taxed according to the tax laws in Denmark, subject to corporate tax of |
|
3. |
The Company has not provided for Israeli income tax and foreign withholding taxes on US$
The Company currently has no plans to repatriate those funds and intends to indefinitely reinvest them in its non-Israeli operations. The unrecognized deferred tax liability associated with these temporary differences was approximately US$
|
E. |
Tax assessments |
1. |
For the Israeli jurisdiction the Company has final tax assessments for all years up to and including the tax year ended December 31, 2017.
|
|
2. |
For the US federal jurisdiction, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2018. For the New Jersey and California state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2017. For the Virginia, Tennessee, New York and New Mexico state jurisdictions, Silicom Inc. has final tax assessments for all years up to and including the tax year ended December 31, 2019. For the Texas state jurisdiction, Silicom Inc. has open tax assessments for the years 2018 through 2022. For the Illinois state jurisdiction, Silicom Inc. has open tax assessments for the years 2020 through 2022.
|
|
3. |
For the Danish jurisdiction, Silicom Denmark has final tax assessments for all years up to and including the tax year ended December 31, 2016.
|
F - 45
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
Note 15 - Taxes on Income (cont’d)
F. |
Income before income taxes and income taxes expense (benefit) included in the consolidated statements of operations |
Year ended December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Income before income taxes:
|
||||||||||||
Israel
|
|
|
|
|||||||||
Foreign jurisdictions
|
|
|
|
|||||||||
|
|
|
||||||||||
Current taxes:
|
||||||||||||
Israel
|
|
|
|
|||||||||
Foreign jurisdictions
|
|
|
|
|||||||||
|
|
|
||||||||||
Current tax (benefits) expenses relating to prior years:
|
||||||||||||
Israel
|
|
(
|
)
|
(
|
)
|
|||||||
Foreign jurisdictions
|
(
|
)
|
(
|
)
|
|
|||||||
(
|
)
|
(
|
)
|
(
|
)
|
|||||||
Deferred taxes:
|
||||||||||||
Israel
|
|
|
|
|||||||||
Foreign jurisdictions
|
(
|
)
|
(
|
)
|
|
|||||||
(
|
)
|
|
|
|||||||||
Income tax expense
|
|
|
|
F - 46
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
G. |
Deferred tax assets and liabilities |
December 31
|
December 31
|
|||||||
2021
|
2022
|
|||||||
US$ thousands
|
US$ thousands
|
|||||||
Deferred tax assets:
|
||||||||
Accrued employee benefits
|
|
|
||||||
Research and development costs
|
|
|
||||||
Share based compensation
|
|
|
||||||
Intangible assets
|
|
|
||||||
Operating lease liabilities
|
|
|
||||||
Other
|
|
|
||||||
Total deferred tax assets
|
|
|
||||||
Deferred tax liabilities:
|
||||||||
Intangible assets
|
(
|
)
|
(
|
)
|
||||
Goodwill*
|
(
|
)
|
(
|
)
|
||||
Operating leases right-of-use, net
|
(
|
)
|
(
|
)
|
||||
Other
|
(
|
)
|
|
|||||
Total deferred tax liabilities
|
(
|
)
|
(
|
)
|
||||
Net deferred tax assets
|
|
|
||||||
In Israel
|
|
|
||||||
Foreign jurisdictions
|
(
|
)
|
(
|
)
|
||||
Net deferred tax assets
|
|
|
||||||
Non-current deferred tax assets
|
|
|
||||||
Non-current deferred tax liabilities
|
(
|
)
|
(
|
)
|
* The recognized goodwill is deductible for income tax purposes for 10 years.
F - 47
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
H. |
Reconciliation of the statutory tax expense to actual tax expense |
Year ended December 31
|
||||||||||||
2020
|
2021
|
2022
|
||||||||||
US$ thousands
|
||||||||||||
Income before income taxes
|
|
|
|
|||||||||
Statutory tax rate in Israel
|
|
%
|
|
%
|
|
%
|
||||||
|
|
|
||||||||||
Increase (decrease) in taxes resulting from:
|
||||||||||||
Non-deductible operating expenses
|
|
|
|
|||||||||
Prior years adjustments
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Tax effect due to "Preferred Enterprise" status
|
(
|
)
|
(
|
)
|
(
|
)
|
||||||
Statutory rate differential
|
|
(
|
)
|
|
||||||||
Other
|
(
|
)
|
(
|
)
|
|
|||||||
Income tax expense
|
|
|
|
F - 48
Silicom Ltd. and its Subsidiaries
Notes to the Consolidated Financial Statements
I. |
Accounting for uncertainty in income taxes The accounting literature clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position.
During 2020, 2021 and 2022 the Company and its subsidiaries did not have any significant unrecognized tax benefits and thus, no related interest and penalties were accrued.
In addition, the Company and its subsidiaries do not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.
|
F - 49