What is the materiality concept? Is the dollar amount that is material the same for a...
What is the materiality concept? Is the dollar amount that is material the same for a company that has annual sales of $10,000 compared with a company that has annual sales of $1,000,000?
Homework Answers
Materiality concept / Principle is an impact by ignoring or reporting of certain value of the financial statements. As per the Accounting Standards/ Policies and procedures of financial statements reporting certain values or numbers can be considered as immaterial.
Ex: 1. Less than 5% value of Assets
2. $100 of expenditure out of $ 5000000 prepaid expenditure while in matching / comparing the financials
While reporting and comparing 2 companies financials, when there is a 100 times of difference in figures of annual sales. yes the single Dollar may not be a material. However while reporting individually the company having $10,000 annual turnover / sales has materiality of single dollar.
Its appropriately depends on the decision of reporting manager/ authority as per IAS.
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What is the materiality concept? Is the dollar amount that is
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