IASB Releases Proposal on Materiality
released guidance both the entity’s specific circumstances and how the information will be used by users of the financial statements." Further, the guidance advises that what's material may vary from year to year, " so materiality is reassessed in each reporting period in the light of the entity’s circumstances during that period. This assessment should include comparing the current year information with comparative information for prior periods to assess changes in the entity’s activities or circumstances during the period."
While the guidance notes that quantitative measures alone do not drive materiality, it did say that they can be useful tool in determining in applying the concept, though once again said the circumstances and context of the entity in question must be considered.
Further, it cautioned against disclosing something as material just to be safe, asking entities to consider whether there is good reason to consider something material, as well as whether doing so obscures other, more important, information. The proposal says you do not need to apply disclosure standards if the information is not material.
The proposed guidance comes shortly after the Financial Accounting Standards Board released its own exposure drafts on materiality, which was also produced in the interests of streamlining reporting practices by reducing unnecessary disclosures that none the less are classified as material by practitioners.