What is materiality?

Question

Accepted Answer

Materiality is the concept of determining the significance or importance of information in relation to a specific context.

Materiality is a subjective concept that varies depending on the nature of the information and its impact on decision-making.
It involves assessing whether the information, if omitted or misstated, would influence the decisions of users of the financial statements.
Materiality is often considered in terms of both quantitative (financial impact) and qualitative (relevance) factors.
For example, a small error in the financial statements may not be material if it does not affect the overall financial picture of the company.
However, a misstatement in a key performance indicator that investors rely on for decision-making could be considered material.

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