IASB clarifies definition of material
FINANCIAL REPORTING INSIGHTS |
The International Accounting Standards Board (IASB) recently issued amendments to International Accounting Standard (IAS) 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, to clarify the definition of “material” and improve understanding of the current requirements.
The prior definition of “material” was: 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. The new definition of “material” is: Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
The changes are effective for annual periods beginning on or after January 1, 2020, but may be applied earlier.