International Accounting Standard (IAS) 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates define the term ‘material’ as follows...
International Accounting Standard (IAS) 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates define the term ‘material’ as follows:
'Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size or nature of the item, or a combination of both, could be the determining factor.'
The International Accounting Standards Board (IASB) observed that entities face difficulties in making material judgements while preparing their financial statements. These difficulties were not only behavioural in nature but also relate to the existing definition of the term material.
Recently, the IASB issued the following two documents in relation to the definition of ‘material’ and guidance on making materiality judgements:
This issue of IFRS Notes provides an overview of these publications.
To access the text of the ED issued by IASB on amendments to IAS 1 and IAS 8, please click here.
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