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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Note 2 -</font></div></td>
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<div align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">SIGNIFICANT ACCOUNTING POLICIES</font></div></td></tr></table></div>
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<div style="text-indent: 0pt; display: block; margin-left: 54pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP").</font></div>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">A.</font></div></td>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions are employed in estimates used in determining values of intangible assets, sales and return accruals, legal contingencies, tax assets and tax liabilities, stock-based compensation costs, retirement and post-retirement benefits (including the actuarial assumptions), financial instruments with no observable market quotes, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from estimated results.</font></div></div></td></tr></table></div>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">B.</font></div></td>
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<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">ADOPTION OF NEW ACCOUNTING POLICIES</font></div></td></tr></table></div>
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<div style="text-align: justify;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In July 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2010-20, "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses", which is intended to provide financial statement users with greater transparency about an entity's allowance for credit losses and the credit quality of its financial receivables. ASU 2010-20 is effective for the Company from January 1, 2010. As the ASU specifically excludes short-term trade accounts receivable, the adoption of the standard did not have a significant impact on the Company's consolidated financial statements.</font></div></td></tr></table></div>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(2)</font></div></td>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Effective January 1, 2010, the Company adopted the new guidance contained in ASC 810 for the consolidation of variable interest entities. This new guidance replaces the prior quantitative approach for identifying which enterprise should consolidate a variable interest entity, which was based on which enterprise was exposed to a majority of the risks and rewards, with a qualitative approach, based on which enterprise has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the variable interest entity. Determination about whether an enterprise should consolidate a variable interest entity is required to be evaluated continuously as changes to existing relationships or future transactions. The adoption of this standard did not have a material impact on our financial position or results of operations.</font></font></div></div></td></tr></table></div>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">C.</font></div></td>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company's revenues are generated mainly in U.S. dollars. In addition, most of the Company's costs are incurred in U.S. dollars. The Company's management believes that the U.S. dollar is the primary currency of the economic environment in which the Company operates. Thus, the functional and reporting currency of the Company is the U.S. dollar.</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Transactions and balances of the Company and certain subsidiaries, which are denominated in other currencies, have been remeasured into U.S. dollars in accordance with principles set forth in ASC 830, "Foreign Currency Matters". All exchange gains and losses from the remeasurement mentioned above are reflected in the statement of income as financial expenses or income, as appropriate.</font></div></div></td></tr></table></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">For those foreign subsidiaries and investees whose functional currency has been determined to be other than the U.S. dollar, assets and liabilities are translated at year-end exchange rates, and statement of income items are translated at average exchange rates prevailing during the year. Resulting translation differences are recorded as a separate component of accumulated other comprehensive income in shareholders' equity.</font></div></div></td></tr></table></div>
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<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">D.</font></div></td>
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<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">PRINCIPLES OF CONSOLIDATION</font></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The consolidated financial statements include the accounts of Elbit Systems and its wholly and majority-owned subsidiaries.</font></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Intercompany transactions and balances, including profit from intercompany sales not yet realized outside the Company, have been eliminated upon consolidation.</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">On January 1, 2009, the Company adopted an amendment to ASC 810, "Consolidation", according to which a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as a separate component of equity in the consolidated financial statements. As such, changes in the parent's ownership interest with no change of control are treated as equity transactions, rather than step acquisitions or dilution gains or losses. The amendment clarifies that losses of partially owned consolidated subsidiaries shall continue to be allocated to the non-controlling interests even when their investment was already reduced to zero.</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The amendment applies prospectively, except for the presentation and disclosure requirements, which are applied retrospectively to all periods presented. As a result, upon adoption, the Company retroactively reclassified the "Minority Interests" balance previously included in a mezzanine section of the consolidated balance sheet to be presented in a new caption in total shareholders' equity, "Non-controlling Interest". The adoption also impacted certain captions previously used on the consolidated statement of income, largely identifying net income including the portion attributable to non-controlling interest and net income attributable to Elbit Systems Ltd.'s shareholders. This amendment required the Company to classify non-controlling interest as part of the consolidated net income ($62,372 for the year ended December 31, 2008).</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The net income amounts the Company has previously reported are now presented as "Net income attributable to Elbit Systems Ltd. shareholders", and, as required, earnings per share continue to reflect amounts attributable only to Elbit Systems Ltd. shareholders. Similarly, in the statements of changes in shareholders' equity, the Company distinguished between equity amounts attributable to Elbit Systems Ltd. shareholders and amounts attributable to the non-controlling interest. Additional disclosures required by this amendment are also included in Note 21, shareholders' equity.</font></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">E. </font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">BUSINESS COMBINATIONS</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Effective January 1, 2009, the Company adopted the amended ASC 805, "Business Combinations". ASC 805 requires recognition of assets acquired, liabilities assumed, and non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. This ASC also requires the fair value of acquired in-process research and development ("IPR&D") to be recorded as intangibles with indefinite lives, contingent consideration to be recorded on the acquisition date, and restructuring and acquisition-related deal costs to be expensed as incurred. Any excess of the fair value of net assets acquired over purchase price and any subsequent changes in estimated contingencies are to be recorded in earnings. In addition, changes in valuation allowance related to acquired deferred tax assets and in acquired income tax position are to be recognized in earnings.</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">ASC 805 is applied prospectively for all business combinations occurring after January 1, 2009, except for changes in valuation allowance related to deferred tax assets and changes in acquired income tax position originating from business combinations that occurred prior to the effective date of this ASC, which are recognized in earnings following the adoption date.</font></div></div></td></tr></table></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">F.</font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">CASH AND CASH EQUIVALENTS</font></div>
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<div style="text-align: justify;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less, when purchased.</font></div></div></td></tr></table></div></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">G. </font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">SHORT-TERM BANK DEPOSITS</font></div>
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<div style="text-align: justify;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Short-term bank deposits are deposits with original maturities of more than three months but less than one year. The short–term bank deposits are presented at their cost, which approximates fair value.</font></div></div></td></tr></table></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-size: 10pt;" class="_mt">H.</font></font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-size: 10pt;" class="_mt">AVAILABLE-FOR-SALE MARKETABLE SECURITIES</font></font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-size: 10pt;" class="_mt">The Company accounts for all its investments in debt securities and for investments in marketable equity securities of entities in which it does not have significant influence, in accordance with ASC 320, "Investments - Debt and Equity Securities". The Company classifies all debt securities and marketable equity securities as "available-for-sale". All of the Company's investments in available-for-sale securities are reported at fair value. Unrealized gains and losses are comprised of the difference between fair value and the cost of such securities and are recognized, net of tax, as accumulated other comprehensive income ("OCI") in shareholders' equity.</font></font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Prior to 2009, declines in fair value of available-for-sale debt and equity securities that were considered other-than-temporary, based on criteria described in SAB 59, "Accounting for Non-current Marketing Equitable Securities", were charged to earnings.</font></div></div></td></tr></table></div></div></div></div></div></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In 2009, the Company adopted a new guidance that changed the impairment and presentation model for its available-for-sale debt securities. Under the amended impairment model, an other-than-temporary impairment ("OTTI") loss is recognized in earnings if the entity has the intent to sell the debt security, or if it is more likely than not that it will be required to sell the debt security before recovery of its amortized cost basis. However, if an entity does not expect to sell a debt security, it will still need to evaluate expected cash flows to be received and determine if a credit loss exists. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized currently in earnings. Amounts relating to factors other than credit losses are recorded in other comprehensive income.</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Upon the adoption of the above mentioned new guidance, the Company reclassified a non-credit related amount of $7,086, net of tax of $1,772, for OTTI losses recognized in earning prior to January 1, 2009, as a cumulative effect adjustment that increased retained earnings and decreased OCI at January 1, 2009. As of December 31, 2010, the Company evaluated debt securities classified as available for sale for OTTI and the existence of credit losses. The cumulative amounts related to the Company's credit loss portion of the OTTI losses on debt securities held as of December 31, 2010, that the Company does not intend to sell and it is not more likely than not that the Company will be required to sell the security prior to recovery of the amortized cost basis is $19,883.</font></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">I. </font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">INVENTORIES</font></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Inventories are stated at the lower of cost or market value. Inventory write-offs are provided to cover risks arising from slow-moving items or technological obsolescence for which recoverability is not probable.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Cost is determined as follows:</font></div></div></div></td></tr></table>
<div style="text-indent: 0pt; display: block;"> </div>
<div style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 81pt;"> </td>
<td style="width: 18pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline;" class="_mt">·</font></font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Raw materials using the average or FIFO cost method.</font></div></td></tr></table></div></div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 81pt;"> </td>
<td style="width: 18pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline;" class="_mt">·</font></font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Work in progress:</font></div></td></tr></table></div></div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 99pt;"> </td>
<td style="width: 18pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline;" class="_mt">·</font></font></div></td>
<td style="text-align: justify;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Costs incurred on long-term contracts in progress include direct labor, material, subcontractors, other direct costs and an allocation of overheads, which represent recoverable costs incurred for production, allocable operating overhead cost and, where appropriate, research and development costs (see Note 2(W)).</font></div></td></tr></table></div></div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 99pt;"> </td>
<td style="width: 18pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline;" class="_mt">·</font></font></div></td>
<td style="text-align: justify;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Labor overhead is generally included on a basis of updated hourly rates and is allocated to each project according to the amount of hours expended. Material overhead is generally allocated to each project based on the value of direct material that is charged to the project.</font></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Advances from customers are allocated to the applicable contract inventories and are deducted from the inventory balance. Advances in excess of related inventories are classified as liabilities.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Pre-contract costs are generally expenses, but can deferred and included in inventory, only when such costs can be directly associated with a specific anticipated contract and if their recoverability from the specific anticipated contract is probable according to the guidelines of ASC 605-35.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font size="2" class="_mt"> </font> </div>
<div style="text-indent: 0pt; display: block;">
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block;">
<div>
<div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">J.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">INVESTMENT IN AFFILIATED COMPANIES, A PARTNERSHIP AND OTHER COMPANIES</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Investments in affiliated companies and a partnership that are not controlled but over which the Company can exercise significant influence (generally, entities in which the Company holds approximately between 20% and 50% of the voting rights of the investee) are presented using the equity method of accounting. Profits on intercompany sales, not realized outside the Company, are eliminated. The Company discontinues applying the equity method when its investment (including advances and loans) is reduced to zero and the Company has not guaranteed obligations of the affiliate or otherwise committed to provide further financial support to the affiliate.</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Investments in preferred shares, which are not in substance common stock, are recorded on a cost basis according to ASC 323-10-15-13, "Investments-Equity Method and Joint Ventures-In-substance Common Stock" and ASC 323-10-40-1, "Investment-Equity Method and Joint Ventures-Investee Capital Transactions."</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">A change in the Company's proportionate share of an investee's equity, resulting from issuance of common or in-substance common shares by the investee to third parties, is recorded as a gain or loss in the consolidated income statements in accordance with ASC 323-10-40-1, "Investment-Equity Method and Joint Ventures-Investee Capital Transactions."</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Investments in non-marketable equity securities of entities in which the Company does not have control or the ability to exercise significant influence over their operation and financial policies, are recorded at cost (generally when the Company holds less than 20% of the voting rights).</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Management evaluates investments in affiliated companies, partnerships and other non-marketable equity securities for evidence of other-than-temporary declines in value. Such evaluation is dependent on the specific facts and circumstances. Accordingly, in determining whether other-than-temporary declines exist, management evaluates indicators for other-than-temporary declines and evaluates financial information (e.g. budgets, business plans, financial statements, etc.). During 2009, an impairment loss of $665 related to the investment in Chip PC was recognized (see Note 6(B)(5)). During 2008, an impairment loss of $10,514 related to the investment in Sandel Avionics Inc. was recognized (See Note 6(C)(2)).</font></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"> </div>
<div style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">K.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">VARIABLE INTEREST ENTITIES</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">ASC 810-10, "Consolidation" provides a framework for identifying Variable Interest Entities ("VIEs") and determining when a company should include the assets, liabilities, non-controlling interests and results of activities of a VIE in its consolidated financial statements.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company's assessment of whether an entity is a VIE and the determination of the primary beneficiary is judgmental in nature and involves the use of significant estimates and assumptions. Those include, among others, forecasted cash flows, their respective probabilities and the economic value of certain preference rights. In addition, such assessment also involves estimates of whether a group entity can finance its current activities, until it reaches profitability, without additional subordinated financial support<font style="display: inline; font-size: 10pt;" class="_mt">.</font></font></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br />
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block;">
<div>
<div>
<div> </div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">UAV Tactical Systems Ltd. ("U-TacS"), in the U.K. is considered to be a variable interest entity. As Elbit Systems is the primary beneficiary and has both the power to direct its activities and absorb the majority of its loss or right to majority of its earnings based upon holding the majority voting rights in U-TacS (51%), U-TacS is consolidated in the Company's financial statements.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"> </div>
<div align="justify">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In November 2010, the Company, through its wholly-owned subsidiary, Kinetics Ltd. ("Kinetics"), signed an agreement to invest in Pearls of Wisdom Advanced Technologies Ltd. ("Pearls of Wisdom"), an amount of up to $18,000. The investment will be performed in several stages over several years and the Company's holdings in Pearls of Wisdom will increase gradually. The Company's initial ownership percentage is less than 50%</font></font></div><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Pearls of Wisdom is considered to be a variable interest entity. The Company has determined that it is not the primary beneficiary as it lacks the powers to direct the activities of Pearls of Wisdom that most significantly impact the entity's economic performance.</font></div></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div align="center"> </div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">L.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">LONG-TERM RECEIVABLES</font></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 81pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Long-term trade and other receivables, with long-term payment terms, which are considered collectible, are recorded at their estimated present values (determined based on the market interest rates at the date of initial recognition).</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">M. </font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">LONG-TERM BANK DEPOSITS</font></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Long-term bank deposits are deposits with maturities of more than one year. These deposits are presented at cost and earn interest at market rates. Accumulated interest to be received over the next year is recorded as a current asset. The deposits and accumulated interest approximate fair value.</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">N. </font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">PROPERTY, PLANT AND EQUIPMENT</font></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Property, plant and equipment are stated at cost, net of accumulated depreciation and investment grants. For equipment produced for the Company's own use, cost includes materials, labor and overhead (including interest costs, when applicable) but not in excess of the fair value of the equipment.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 446pt;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Depreciation is calculated by the straight-line method over the estimated useful life of the assets at the following annual rates:</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div align="right">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="85%">
<tr><td style="padding-bottom: 2px;" valign="bottom" width="60%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="10%" colspan="2">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">%</font></div></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="28%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="60%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -42.5pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Buildings and leasehold improvements (*)</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">2-33</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="28%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="white"><td valign="bottom" width="60%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -42.5pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Instruments, machinery and equipment</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">3-33</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="28%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="60%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -42.5pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Office furniture and other</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">6-33</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="28%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="white"><td valign="bottom" width="60%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -42.5pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Motor vehicles</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">12-33</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="28%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -42.5pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">(Mainly 15%)</font></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block; margin-left: 90pt; margin-right: -42.55pt;" align="justify"> </div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 72pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(*) Prepayments for operating lease and leasehold improvements are amortized generally over the term of the lease or the useful life of the assets, whichever is shorter.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 72pt; margin-right: 0pt;"><font size="2" class="_mt"> </font> </div></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">O. </font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">INVESTMENT GRANTS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As a governmental incentive for industrial companies in Israel, the "Investment Center", which is a branch of the Israel Ministry of Industry and Trade, permits industrial companies to submit a request to qualify as an "Approved Enterprise". An Approved Enterprise is entitled to certain benefits in respect of capital investments. The benefits may be in the form of reduced tax rates and of capital grants received as a percentage of the investments of the Approved Enterprise. The amount of a capital grant is determined as a percentage of the Approved Enterprise investment in property, plant and equipment. These capital grants are non-royalty bearing and are not conditioned on the results of operations. As the capital grants are a direct participation in the cost of the acquisition of property, plant and equipment, they are offset against the cost of property, plant and equipment.</font></div></div></td></tr></table></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">P.</font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">OTHER INTANGIBLE ASSETS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Other identifiable intangible assets mainly consist of purchased technology, customer relations and trademarks. These intangible assets are stated at cost net of accumulated amortization and impairments, and are amortized over their useful life using the straight-line method, or the accelerated method, which ever better reflects the applicable expected utilization pattern.</font></div></div></td></tr></table></div></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Q.</font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">IMPAIRMENT OF LONG-LIVED ASSETS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company's long-lived assets and finite-lived intangible assets are reviewed for impairment in accordance with ASC 360-10-35 "Property, Plant and Equipment – Subsequent Measurement" whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets (or assets group) to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If an asset is determined to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. For each of the three years in the period ended December 31, 2010, no material impairment has been identified.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As required by ASC 820, "Fair Value Measurements", the Company applies assumptions that marketplace participants would consider in determining the fair value of long lived assets (or assets groups).</font></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">R.</font></div></td>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">GOODWILL IMPAIRMENT</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Goodwill is subject to an annual impairment test at the reporting unit level (or more frequently if impairment indicators arise).</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company identified several reporting units based on the guidance of ASC 350, "Intangibles – Goodwill and Other".</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">ASC 350 prescribes a two-phase process for impairment testing of goodwill. The first phase screens for impairment, while the second phase (if necessary) measures impairment.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. In such case, the second phase is then performed, and the Company measures impairment by comparing the carrying amount of the reporting unit's goodwill to the implied fair value of that goodwill. An impairment loss is recognized in an amount equal to the excess. For each of the three years in the period ended December 31, 2010, no material impairment losses have been identified.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As required by ASC 820, "Fair Value Measurements", the Company applies assumptions that market place participants would consider in determining the fair value of each reporting unit.</font></div></div></td></tr></table></div></div>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">S.</font></div></td>
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<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">SEVERANCE PAY</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Elbit Systems' and its Israeli subsidiaries' obligations for severance pay are calculated pursuant to Israel's Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment, as of the balance sheet date and are presented on an undiscounted basis (the "Shut Down Method"). Employees are entitled to one month's salary for each year of employment or a portion thereof. The obligation is provided by monthly deposits with insurance policies and by an accrual. The value of these policies is recorded as an asset on the Company's balance sheet. The deposited funds may be withdrawn only upon the fulfillment of the obligation, pursuant to the Severance Pay Law or labor agreements. The value of the deposited funds is based on the cash surrender value of these policies and includes profits (or losses) accumulated to balance sheet date.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Elbit Systems and its Israeli subsidiaries have<font style="display: inline; font-size: 10pt;" class="_mt"> </font>entered into an agreement with some of their employees implementing Section 14 of the Severance Pay Law and the General Approval of the Labor Minister dated June 30, 1998, issued in accordance to the said Section 14, mandating that upon termination of such employees' employment, all the amounts accrued in their insurance policies shall be released to them. The severance pay liabilities and deposits<font style="display: inline; font-size: 10pt;" class="_mt"> </font>covered by these plans are not reflected in the balance sheet as the severance pay risks have been irrevocably transferred to the severance funds.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Severance pay expenses for the years ended December 31, 2010, 2009 and 2008 amounted to approximately $50,228, $42,999 and $51,567, respectively.</font></div></div></td></tr></table></div></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">T. </font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">PENSION AND OTHER POSTRETIREMENT BENEFITS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company accounts for its obligations for pension, and other postretirement benefits, in accordance with ASC 715, "Compensation – Retirement Benefits" (See Note 17).</font></div></div></td></tr></table></div>
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<div style="width: 100%;" align="left"><font style="display: inline; font-family: Times New Roman; font-size: 8pt;" class="_mt"> </font></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div></div>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">U.</font></div></td>
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<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">REVENUE RECOGNITION</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company generates revenues principally from long-term contracts involving the design, development, manufacture and integration of defense systems and products. In addition, to a minor extent, the Company provides support and services for such systems and products.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Revenues from long-term contracts are recognized primarily using ASC 605-35, "Construction-Type and Production-Type Contracts", according to which revenues are recognized on the percentage-of-completion basis.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Sales under long-term fixed-price contracts which provide for a substantial level of development efforts in relation to total contract efforts are recorded using the cost-to-cost method of accounting as the basis to measure progress toward completing the contract and recognizing revenues using the percentage of completion basis. According to this method, sales and profits are recorded based on the ratio of costs incurred to estimated total costs at completion. In certain circumstances, when measuring progress toward completion, the Company considers other factors, such as achievement of performance milestones.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Sales and anticipated profit under long-term fixed-price contracts which provide for a substantial level of production effort are recorded on a percentage-of-completion basis, using the units-of-delivery as the basis to measure progress toward completing the contract and recognizing revenues. In certain circumstances, which involve long-term fixed-price production type contracts for non-homogenous units or small quantities of units, or when the achievement of performance milestones provides a more reliable and objective measure of the extent of progress toward completion, revenue is recognized based on the achievement of performance milestones.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Sales and anticipated profit under long-term fixed-price contracts that involve both development and production efforts are recorded using the cost-to-cost method and units-of-delivery method as applicable to each phase of the contract, as the basis to measure progress toward completion. In addition, when measuring progress toward completion under the development portion of the contract, in certain circumstances, the Company considers other factors, such as achievement of performance milestones.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The percentage-of-completion method of accounting requires management to estimate the cost and gross profit margin for each individual contract. Estimated gross profit or loss from long-term contracts may change due to differences between actual performance and original estimated forecasts. Such changes in estimated gross profit are recorded in results of operations when they are reasonably determinable by management, on a cumulative catch-up basis. Anticipated losses on contracts are charged to earnings when determined to be probable.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Sales under cost-reimbursement-type contracts are recorded as costs are incurred. Applicable estimated profits are included in earnings in the proportion that incurred costs bear to total estimated costs.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Amounts representing contract change orders, claims or other items are included in sales only when they can be reliably estimated and realization is probable. Penalties and awards applicable to performance on contracts are considered in estimating sales and profit rates and are recorded when they are probable and there is sufficient information to assess anticipated contract performance.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company believes that the use of the percentage-of-completion method is appropriate as the Company has the ability to make reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. In addition, contracts executed include provisions that clearly specify the enforceable rights regarding services to be provided and received by the parties to the contracts, the consideration to be exchanged and the manner and terms of settlement. In all cases, revenue is recognized when the Company expects to perform its contractual obligations, and its customers are expected to satisfy their obligations under the contract.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Management reviews periodically the estimates of progress towards completion and project costs. These estimates are determined based on engineering estimates and past experience, by personnel having the appropriate authority and expertise to make reasonable estimates of the related costs. Such engineering estimates are reviewed periodically for each specific contract by professional personnel from various disciplines within the organization. These estimates take into consideration the probability of achievement of certain milestones, as well as other factors that might impact the contract's completion<font style="display: inline; font-size: 10pt;" class="_mt"> </font>and project cost.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">A number of internal and external factors affect our cost estimates, including labor rates, estimated future prices of material, revised estimates of uncompleted work, efficiency variances, linkage to indices and exchange rates, customer specifications and testing requirement changes. If any of the above factors were to change, or if different assumptions were used in estimating progress cost and measuring progress towards completion, it is possible that materially different amounts would be reported in the Company's consolidated financial statements.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In certain circumstances, sales under short-term fixed-price production type contracts or sale of products are accounted for in accordance with SAB No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"), and recognized when all the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the seller's price to the buyer is fixed or determinable, no further obligation exists and collectability is reasonably assured.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In cases where the contract involves the delivery of products and performance of services, or other obligations (See Note 20(B)), the Company follows the guidelines specified in ASC 605-25, "Multiple-Element Arrangements", in order to allocate the contract consideration between the identified different elements.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Service revenues include contracts primarily for the provision of supplies or services other than associated with design, development or production activities. It may be a stand-alone service contract or a service element, which was separated from the design, development or production contract according to the criteria established in ASC 605-25. Service contracts primarily include operation and maintenance contracts, outsourcing-type arrangements, return and repair contracts, training, installation services, etc. Revenue from services were less than 10% of consolidated revenues in each of the fiscal years 2008, 2009 and 2010.</font></div>
<div style="text-align: justify; text-indent: 9pt; display: block; margin-left: 63pt; margin-right: -11.6pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As for research and development costs accounted for as contract costs refer to Note 2(W).</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div></div></td></tr></table></div></div></div></div></div></div></div>
<div> </div>
<div> </div>
<div> </div>
<div> </div>
<div> </div>
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block;">
<div>
<div>
<div style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">V.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">WARRANTY</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company estimates the costs that may be incurred under its basic warranty. Such costs are: (1) estimated as part of the total contract's cost or (2) recorded as a liability at the time revenue for delivered products is recognized. The specific terms and conditions of those warranties vary depending upon the product sold and the country in which the Company does business. Factors that affect the Company's warranty cost include the number of delivered products, engineering estimates and anticipated rates of warranty claims. The Company periodically assesses the adequacy of its recorded warranty cost and adjusts the amount as necessary. Specific warranty reserves are recorded in the period defects or potential products failures are identified and recorded based on estimates made by management. The estimates are evaluated on a periodic basis.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Changes in the Company's provision for warranty, which is included in other payables and accrued expenses in the Balance Sheet, are as follows:</font></div></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"> </div>
<div align="center"> </div>
<div align="right">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="88%">
<tr><td style="padding-bottom: 2px;" valign="bottom" width="76%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="10%" colspan="2">
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">2010</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="10%" colspan="2">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -6.9pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">2009</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="76%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Balance, at January 1</font></div></td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">126,783</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">92,301</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td valign="bottom" width="76%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Warranties issued during the year</font></div></td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">69,213</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">65,493</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="76%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Warranties related to acquisitions</font></div></td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">19,015</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td style="padding-bottom: 2px;" valign="bottom" width="76%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Reduction due to warranties forfeited or paid during the year</font></div></td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">(50,233</font> </td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">)</font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">(31,011</font> </td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">)</font> </td></tr>
<tr bgcolor="#cceeff"><td style="padding-bottom: 4px;" valign="bottom" width="76%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;" align="justify"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Balance, at December 31</font></div></td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">164,778</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%" align="right"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">126,783</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr></table></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">W.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">RESEARCH AND DEVELOPMENT COSTS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Research and development costs, net of participation grants, include costs incurred for independent research and development and bid and proposal efforts and are expensed as incurred unless the costs are related to certain contractual arrangements which are recorded as part of cost of sales, over the period that revenue is recognized, consistent with the Company's revenue recognition accounting policy. The Company does not have significant stand-alone research and development arrangements performed for others.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company has certain research and development contractual arrangements that meet the requirements for best efforts research and development accounting. Accordingly, the amounts funded by the customer are recognized as an offset to its research and development expenses rather than as contract revenues.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Elbit Systems and certain Israeli subsidiaries receive grants (mainly royalty-bearing) from the Israeli Chief Scientist's Office ("OCS") and from other sources for the purpose of partially funding approved research and development projects. The grants are not to be repaid, but instead Elbit Systems and certain Israeli subsidiaries are obliged to pay royalties as a percentage of future sales if and when sales from the funded projects are generated. These grants are recognized as a deduction from research and development costs at the time the applicable entity is entitled to such grants on the basis of the research and development costs incurred. Since the payment of royalties is not probable when the grants are received, the Company records a liability in the amount of the estimated royalties for each individual contract, when the related revenues are recognized, as part of cost of revenues. For more information regarding OCS royalties' commitment, please see Note 20(A).</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div></div></td></tr></table></div></div></div></div></div></div></div>
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block;">
<div>
<div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">X.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">INCOME TAXES</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company accounts for income taxes and uncertain tax positions in accordance with ASC 740, "Income Taxes". This guidance prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As part of the determination of its tax liability, management exercises considerable judgment in evaluating tax positions taken by the Company in determining the income tax provision and establishes reserves for tax contingencies.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company records interest and penalties related to its unrecognized tax benefit or exposures in the financial statements as income tax expense.</font></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Y.</font></div></td>
<td align="left">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">CONCENTRATION OF CREDIT RISKS</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short and long-term deposits, marketable securities and trade receivables.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The majority of the Company's cash and cash equivalents and short and long-term deposits are invested with major banks mainly in Israel and the United States. Deposits in the U.S. may be in excess of insured limits and are not insured in other jurisdictions.<font style="display: inline; font-size: 10pt;" class="_mt"> </font>Management believes that the financial institutions that hold the Company's investments have a high credit rating.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company's trade receivables are derived primarily from sales to large and stable customers and governments located mainly in Israel, the United States and Europe. The Company performs ongoing credit evaluations of its customers and has not experienced in recent years any unexpected material losses. An allowance for doubtful accounts is recognized with respect to those amounts that the Company has determined to be doubtful of collection.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company entered into foreign exchange forward contracts, cross currency interest rate swaps and option strategies (together "derivative instruments") intended to protect against the increase in value of forecasted non-dollar currency cash flows and interest as applicable. These derivative instruments are designed to effectively hedge the Company's non-dollar currency and interest rates exposures (See Note 2(Z)).</font></div></div></td></tr></table></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div></div>
<div style="text-align: justify; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Z.</font></div></td>
<td align="left">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">DERIVATIVE FINANCIAL INSTRUMENTS</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company accounts for derivatives and hedging based on ASC 815, "Derivatives and Hedging", which requires the Company to recognize all derivatives on the balance sheet at fair value. If a derivative meets the definition of a cash flow hedge and is so designated, changes in the fair value of the derivative will be recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings. If a derivative does not meet the definition of a hedge, the changes in the fair value are included in earnings in "Financial income (expenses), net", in each reporting period (See Note 24).</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As part of its hedging strategy, the Company enters into forward exchange contracts in order to protect the Company from the risk that the eventual dollar cash flows from the sale and buy of products to international customers will be adversely affected by changes in exchange rates.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company also enters into forward exchange contracts and options strategies in order to limit the exposure to exchange rate fluctuation associated with payroll expenses mainly incurred in NIS. Such forward contracts on payroll expenses that were entered into in 2010 are designated as cash flow hedges. For such contracts entered into prior to 2010, the Company elected not to follow the designation and documentation processes required to qualify for the hedge accounting method, and any gain or loss derived from such instruments is recognized immediately as "Financial income (expenses), net."</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In connection with the issuance of the NIS 1.1 billion Series A Notes at the Tel Aviv Stock Exchange in 2010 (See Note 16), the Company entered into a ten-year cross-currency interest rate swap transaction with a notional principal of NIS 1.1 billion to effectively hedge the effect of interest and exchange rate difference from NIS Series A Notes. The cross currency interest rate swap effectively converts the fixed interest rate of the debt to a floating interest rate. The terms of the swap agreement substantially match the terms of the debt. Under the terms of the swap agreement, the Company will receive interest payments semi-annually in NIS at an annual rate of 4.84% on the notional principal and will pay interest semi-annually in U.S. Dollars at an annual weighted rate of 1.65% over the six-month LIBOR on the notional principal. The swap agreements are designated as a fair value hedge. The gains and losses related to changes in the fair value of the interest rate swaps are included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying hedged Series A notes.</font></font></div></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"> </div>
<div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">AA.</font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">STOCK-BASED COMPENSATION</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company accounts for share-based arrangements under ASC 718, "Compensation – Stock Compensation", which requires all share-based payments, including grants of employee stock options, to be recognized in the income statement based on their fair values.</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The fair value of employee stock options is estimated at the grant date using a lattice-based option valuation model with the following weighted average assumptions:</font></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div align="right">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="88%">
<tr><td style="padding-bottom: 2px;" valign="bottom" width="64%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="text-align: center; padding-bottom: 2px; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="10%" colspan="2">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">2010</font></div></td>
<td style="text-align: left; padding-bottom: 2px; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="text-align: center; padding-bottom: 2px; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="10%" colspan="2">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">2009</font></div></td>
<td style="text-align: left; padding-bottom: 2px; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="10%" colspan="2" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">2008</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Divided yield</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">2.20%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">2.31%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">1.84%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td></tr>
<tr bgcolor="white"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Expected volatility</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">31.92%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">39.37%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">33.72%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td></tr>
<tr bgcolor="#cceeff"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Risk-free interest rate</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">1.56%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">2.43%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">2.79%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td></tr>
<tr bgcolor="white"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Expected life</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="10%" colspan="2">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -5.4pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">4 years</font></div></td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="10%" colspan="2">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">4 years</font></div></td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="10%" colspan="2">
<div style="text-align: center; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -11.6pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">4 years</font></div></td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Forfeiture rate</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">0.56%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">0.56%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">0.56%</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"> </td></tr>
<tr bgcolor="white"><td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="bottom" width="64%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Suboptimal factor</font></div></td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">1.75</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">1.75</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: center;" valign="bottom" width="9%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">1.75</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr></table></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Because lattice-based option valuation models incorporate ranges of assumptions for inputs, the average of those ranges are disclosed. Expected volatilities are based on implied volatilities from traded options on Elbit Systems' stock, historical volatility of the stock and other factors. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The average of the range, given above, results from certain groups of employees exhibiting different behavior. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. The dividend yield assumption is based on historical dividends.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font size="2" class="_mt"> </font> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">AB. </font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">FAIR VALUE OF FINANCIAL INSTRUMENTS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The carrying amount of cash and cash equivalents, short-term bank deposits, trade receivables, short-term bank credit and loans and trade payables approximate their fair values due to the short-term maturities of such instruments.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The fair value of long-term loans is estimated by discounting the future cash flows using current interest rates for loans of similar terms and maturities. The carrying amount of the long-term loans approximates their fair value.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">As of December 31, 2010, the fair value of the Series A Notes based on quoted market price of the Tel-Aviv Stock Exchange was approximately $309,600.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company accounts for certain assets and liabilities at fair value under ASC 820, "Fair Value Measurements and Disclosures". Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Company categorizes each of its fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The three levels of inputs that may be used to measure fair value are as follows:</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets;</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Level 2 - Includes other inputs that are directly or indirectly observable in the marketplace, other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets with insufficient volume or infrequent transactions, or other inputs that are observable (model-derived valuations in which significant inputs are observable), or can be derived principally from or corroborated by observable market data; and</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Level 3 - Unobservable inputs which are supported by little or no market activity.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company's cross-currency interest rate swaps are valued under an income approach using industry-standard models that consider various assumptions, including time value, volatility factors, current market and contractual prices for the underlying, and counterparty non-performance risk. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instruments, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.</font></font></div><br />
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company measures its marketable equity securities, debt securities and foreign currency derivative instruments at fair value. Marketable equity securities and government debt securities are classified within Level 1. The Company's investments in Auction Rate Securities ("ARS") and Collateralized Debt Obligations ("CDOs") are classified within Level 3 because they are valued using valuation techniques with significant unobservable inputs. The Company's foreign currency derivative instruments are classified within Level 2 when the valuation inputs are based on quoted prices and market observable data of similar instruments and in Level 3 when valuation inputs are based on significant unobservable data.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Assets and liabilities measured at fair value on a recurring basis are summarized below:</font></div></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block;"> </div>
<div style="text-indent: 0pt; display: block;">
<div align="right">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="88%">
<tr><td style="padding-bottom: 2px;" valign="bottom" width="67%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="31%" colspan="10">
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Fair value measurement at </font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">December 31, 2010 using</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td></tr>
<tr><td style="padding-bottom: 2px;" valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Description of</font></div></td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="9%" colspan="2">
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Quoted Prices </font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">in Active</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Markets for </font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Identical Assets</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> (Level 1)</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="9%" colspan="2">
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Significant</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Other</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Observable</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Inputs</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">(Level 2)</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="padding-bottom: 2px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td>
<td style="border-bottom: black 2px solid;" valign="bottom" width="9%" colspan="2">
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Significant</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Unobservable </font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Inputs</font></div>
<div align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">(Level 3)</font></div></td>
<td style="text-align: left; padding-bottom: 2px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Assets</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Debt securities:</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="9%" colspan="2"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> Government bonds</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">824</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> ARS and CDOs</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">7,179</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Foreign currency option contracts</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">19,100</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Cross currency interest rate swap</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">20,377</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="#cceeff"><td valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Liabilities</font></div></td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="text-align: left;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr>
<tr bgcolor="white"><td style="padding-bottom: 4px;" valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Foreign currency derivative contracts</font></div></td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">-</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">(8,219</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">)</font> </td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">(51</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">)</font> </td></tr>
<tr bgcolor="#cceeff"><td style="padding-bottom: 4px;" valign="bottom" width="67%" align="left">
<div align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt">Total</font></div></td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">824</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">31,258</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="padding-bottom: 4px;" valign="bottom" width="1%" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td>
<td style="border-bottom: black 3px double; text-align: left;" valign="bottom" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">$</font> </td>
<td style="border-bottom: black 3px double; text-align: right;" valign="bottom" width="8%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">7,128</font> </td>
<td style="text-align: left; padding-bottom: 4px;" valign="bottom" width="1%" nowrap="nowrap"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font> </td></tr></table></div></div></td></tr></table>
<div style="text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">For ARS and CDO debt securities, their fair value was determined using an independent third party valuator. The fair value was based on a trinomial discount model employing assumptions that market participants would use in their estimates of fair value. The assumptions included among others, the following: the underlying structure of the security, the financial standing of the issuer, stated maturities, estimates of the probability of the issue being called at par prior to final maturity, estimates of the probability of defaults and recoveries, auctions failure and successful auction or repurchase at par for each period, expected changes in interest rates paid on the securities, interest rates paid on similar instruments, and an estimated illiquidity discount due to extended redemption periods. Finally, the present value of the future principal and interest payments was discounted at rates considered to reflect current market conditions for each security.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"> </div></div></div></div></div></div></div>
<div> </div>
<div> </div>
<div> </div>
<div> </div>
<div> </div>
<div> </div>
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; display: block;">
<div>
<div>
<div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">AC.</font></div></td>
<td align="left">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">BASIC AND DILUTED NET EARNINGS PER SHARE</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Basic earnings per share are computed based on the weighted average number of outstanding ordinary shares during each year. Diluted earnings per share are computed based on the weighted average number of outstanding ordinary shares during each year, plus dilutive potential ordinary shares considered outstanding during the year. Outstanding stock options are excluded from the calculation of the diluted earnings per ordinary share when their effect is anti-dilutive.</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The weighted average number of shares related to outstanding anti-dilutive stock options excluded from the calculations of diluted net earnings per share was 23,041, 22,599 and 35,489 for the years 2010, 2009 and 2008, respectively.</font></font></div></div></div></td></tr></table></div></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">AD.</font></div></td>
<td align="left">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In October 2009, the FASB issued an update to ASC 605-25, "Revenue Recognition – Multiple-Element Arrangements", that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements to:</font></div></div></td></tr></table></div></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div align="center"> </div>
<div>
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center">
<tr valign="top"><td style="width: 85.05pt;">
<div><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font></div></td>
<td style="width: 27pt;">
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(i)</font></div></td>
<td>
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated and how the consideration should be allocated;</font></div></td></tr></table></div>
<div>
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center">
<tr valign="top"><td style="width: 85.05pt;">
<div><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font></div></td>
<td style="width: 27pt;">
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(ii)</font></div></td>
<td>
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Require an entity to allocate revenue in an arrangement using estimated selling prices ("ESP") of deliverables if a vendor does not have vendor-specific objective evidence of selling price ("VSOE") or third-party evidence of selling price ("TPE");</font></div></td></tr></table></div>
<div>
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center">
<tr valign="top"><td style="width: 85.05pt;">
<div><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"> </font></div></td>
<td style="width: 27pt;">
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(iii)</font></div></td>
<td>
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and</font></div></td></tr></table></div>
<div>
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center">
<tr valign="top"><td style="width: 85.05pt;"> </td>
<td style="width: 27pt;">
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;">
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">(iv)</font></font></div></div></td>
<td>
<div align="justify">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Require expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance.</font></font></div></div></td></tr></table></div>
<div align="center"> </div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 81pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The Company will adopt the provisions prospectively to new or materially modified arrangements beginning January 1, 2011. The Company is currently evaluating the impact on its consolidated results of operations and financial condition. The Company estimates that the adoption of the ASC 605-25 update will not have a material effect on its results.</font></div>
<div style="text-indent: 0pt; display: block;"><br /></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<table style="font-family: times new roman; font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="top"><td style="width: 54pt;"> </td>
<td style="width: 27pt;" align="right">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">AE. </font></div></td>
<td align="left">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">RECLASSIFICATIONS</font></div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-size: 10pt;" class="_mt">Certain financial statement data for prior years has been reclassified to conform to current year financial statement presentation</font>.</font></div></div></td></tr></table><br /></div></div></div></div></div></div> </div>Note 2 -
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with U.S. generally acceptedfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 22
-Paragraph 8
falsefalse12Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue