To Disclose or Not to Disclose – Applying the concept of materiality to financial statement disclosures

General Business

January 04, 2016
by Travis Richert, CPA

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Travis Richert Travis Richert, CPA
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As company owners and managers consider what information warrants additional disclosure in their financial statements, there is little guidance available. Applying the concept of materiality requires judgment, and it’s often why the concept of materiality is thought of quantitatively. However, it is also important to consider the qualitative aspects.

Currently, the Financial Accounting Standards Board (FASB) does not define what information should be considered material when an organization prepares its financial statements. Instead, materiality is generally a legal concept, often defined through court decisions. The U.S. Supreme Court’s description of materiality is a “substantial likelihood” that omitting the information would be viewed by a reasonable investor or creditor as having “significantly altered” the total information available to make a decision. 

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