Page 381 - SBR Integrated Workbook STUDENT S18-J19

Current issues

Materiality

4.1 Background

Materiality is an important concept in financial reporting, but users and preparers of
financial statements require more guidance on how to apply it. The Board has
published proposed guidance in an Exposure Draft.

4.2 Key points

The key points from the Exposure Draft are as follows:

 Materiality is not purely quantitative. For example, a transaction is material if it
triggers non-compliance with laws and regulations.

 Materiality considerations should influence the presentation of the financial
statements. For example, immaterial items can be aggregated together.

 Management can adopt certain procedures to reduce the time and cost required
to produce financial statements without causing material misstatements. For
example, many entities write off all capital expenditure below $1,000 to profit or
loss.

 Material misstatements identified before the financial statements are authorised
must be corrected. It is best practice to correct other identified errors, but the
Board acknowledges that this may be costly and lead to delays in publishing the
information.

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