Application of materiality to financial statements

As part of its ‘Disclosure Initiative’, the IASB is seeking comments on its draft ‘Practice Statement’ on the application of materiality to financial statements. The Practice Statement was published on 28 October 2015.

Keywords: Mazars, Thailand, IFRS, IASB

22 December 2015

The document begins with a reminder of the definition of materiality under IFRS, and its application to the complete set of financial statements (including the notes). It then goes on to review how the needs of the users of financial statements should be taken into account when assessing materiality.

The materiality of information depends on qualitative as well as quantitative considerations, and should be assessed both individually and collectively. Moreover, it is not simply a case of deciding whether information should be included in the financial statements, but also how it should be presented and whether it should be aggregated or disaggregated, in both the primary financial statements and the notes.

The document refers back to IAS 1, which states that entities:

  • may omit disclosures required by IFRS if the resulting information is not material; and
  • shall provide information that is not specifically required by IFRS if that information is material.

Finally, the IASB emphasises the importance of reviewing the notes on an annual basis, and provides additional detail on practical expedients used in record-keeping and measurement, as well as on misstatements and omissions.

We will take a closer look at the document in a future issue.

Comments should be sent to the IASB by 26 February 2016. The document can be downloaded from the IFRS website

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