IASB clarifies definition of �material�

IASB clarifies definition of ‘material’

In an effort to make it easier for companies to make materiality judgments, the International Accounting Standards Board (IASB) on Wednesday issued a clarified definition of “material.”

The definition of materiality is a crucial element in accounting because it helps companies decide whether information is important enough to be included in their financial statements. To clarify the definition, the IASB amended IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

Under the 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 entity.

The old definition stated that 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.. Read more on the Journal of Accountancy.