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Getting help with materiality
03 October 2017
The IASB has issued guidance on how to make materiality judgements. The IASB wants to encourage companies to apply judgement instead of using IFRS requirements as a checklist, so that financial statements focus on the information that is useful top investors.
The Board is also consulting separately on proposed clarifications to the definition of ‘material’ information in financial statements.
The concept of materiality is important in the preparation of financial statements, because it helps companies determine which information to include in and exclude from their reports. Companies make materiality judgements not only when deciding what information to disclose and how to present it but also when making decisions about recognition and measurement.
Some companies are unsure about how to make materiality judgements and have therefore used the disclosure requirements in IFRS standards as a checklist. To encourage behavioural change and provide support to companies making such judgement the IASB has issued IFRS Practice Statement 2 Making Materiality Judgements.
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