| j. | Government grants: |
Government grants are recognized when there is reasonable assurance that the grants will be received and the Company will comply with the attached conditions.
Government grants received from the Office of the Israeli National Authority for Technological Innovation at the Ministry of Industry, Trade and Labor (“INATI”) are recognized upon receipt as a liability if future economic benefits are expected from the research project that will result in royalty-bearing sales.
The liability is first measured at fair value using a discount rate that reflects a market rate of interest. The difference between the amount of grant received and the fair value of the liability is accounted for as a Government grant and recognized as a reduction of research and development expenses. After initial recognition, the liability is measured at amortized cost using the effective interest method. Royalty payments are treated as a reduction of the liability. If no economic benefits are expected from the research activity, the grant receipts are recognized as a reduction of the related research and development expenses. In that event, the royalty obligation is treated as a contingent liability in accordance with IAS 37.
In each reporting date, the Company evaluates whether there is reasonable assurance that the liability recognized, in whole or in part, will not be repaid (since the Company will not be required to pay royalties) based on the best estimate of future sales and using the original
effective interest method and, if so, the appropriate amount of the liability is derecognized against other income.
Amounts paid as royalties are recognized as a settlement of the liability.