United States

Making materiality judgments


International Financial Reporting Standards (IFRS) require the use of materiality judgments in decisions about recognition, measurement, presentation and disclosure in financial statements. Some entities are unsure about how to make materiality judgments, so the International Accounting Standards Board (IASB) recently issued IFRS Practice Statement 2, Making Materiality Judgements. The publication encourages companies to apply judgment instead of using IFRS requirements as a checklist, so that financial statements focus on information that is useful to investors. The Practice Statement gathers all the IFRS materiality requirements and adds practical guidance and examples. The Practice Statement neither changes requirements nor introduces new ones, and its use is not mandatory.

The IASB also recently published an Exposure Draft, Definition of Material, which proposes minor 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 Exposure Draft is available for comment until January 15, 2018.