The International Accounting Standards Board (IASB) has published an Exposure Draft of IFRS Practice Statement Application of materiality to financial statements.
The guidance, which is designed to assist management determine whether information is material, is part of the IASB’s wider Disclosure Initiative project.
Materiality in financial reporting
How items are accounted for, measured, recognised and disclosed, all depends on the materiality of the amounts involved or the materiality of any proposed disclosure. The draft IFRS Practice Statement Application of materiality to financial statements provides guidance to help entities apply the concept of materiality to financial statements prepared in accordance with IFRS.
IAASA issued a Paper in 2010 entitled Observations on Materiality in Financial Reporting. That Paper outlined our interaction with issuers at that time as well as specific recommendations as to how issuers should be dealing with, and applying, the concept of materiality in their financial reports. Resulting from this, IAASA’s Head of Financial Reporting Supervision was asked to chair the Sub-Group on Materiality established by the European Securities and Markets Authority (ESMA). The main output from that Sub-Group was the issuance of a Consultation Paper entitled Considerations of Materiality in Financial Reporting followed by a Feedback Statement which provided an overview of the key messages from the responses received to the questions in the consultation. The findings were presented to the IASB and the International Auditing and Assurance Standards Board (IAASB). ESMA has engaged with the IASB on its subsequent broad-based Disclosure Initiative of which this draft IFRS Practice Statement is one of the outputs.
The deadline for submitting comments on the draft IFRS Practice Statement is 26 February 2016.