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IASB clarifies ‘material’ definition
02 November 2018
The IASB has issued amendments to its definition of material to make it easier for companies to make materiality judgments. the definition of material, an important accounting concept in IFRS standards, helps companies decide whether information should be included in their financial statements. the updated definition amends IAS 1 ‘Presentation of Financial Statements’, and IAS 8 ‘Accounting Polices, Changes in Accounting Estimates and Errors’.
Old definition: Omissions or misstatements of items are material if they could, individually or collectively, influence the economic decisions that users make on the basis of the financial statements (IAS 1 ‘Presentation of Financial Statements’).
New definition: Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
The changes are effective from 1 January 2020, but companies can decide to apply them earlier.
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