Materiality
Accounting glossary · Understand, connect, apply
Information is material if omitting, misstating or obscuring it could reasonably influence users’ decisions about a particular entity’s financial reports.
Example
A small amount involving management fraud may matter because of its nature, even if it is not large relative to total sales.
Remember the difference
Materiality involves amount, nature and circumstances. There is no single percentage that works for every entity and issue.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
← Return to the accounting glossary