Materiality
Definition
The threshold at which a misstatement or omission would influence the decisions of a reasonable user of the financial statements. Assessed both quantitatively (percentage benchmarks) and qualitatively (context-specific factors such as trend impact, covenant effects, and management incentive alignment).
Related terms
- Cookie-jar reserve
- An accounting reserve built up in a period of strong earnings by overstating provisions or allowances, then released in a later period...
- Earnings management
- The use of accounting choices, estimates, and timing decisions within the bounds of GAAP or IFRS to influence reported earnings. Permissible in...
- Financial-statement fraud
- Intentional misstatement or omission in financial reports to deceive users of those reports, typically to inflate earnings, understate liabilities, or maintain a...
- PFUTP Regulations 2003
- The Securities and Exchange Board of India's Prohibition of Fraudulent and Unfair Trade Practices (Relating to Securities Markets) Regulations 2003. The primary...
- SEC Staff Accounting Bulletin No. 99 (SAB 99)
- A 1999 SEC interpretive release stating that the traditional five-percent quantitative threshold for materiality is not a safe harbour and that qualitative...
Explained in
- Earnings Management Versus Fraud: The ContinuumThe threshold at which a misstatement or omission would influence the decisions of a reasonable user of the financial statements. Assessed both quantitatively...