The IASB released its Exposure Draft in October 2015, with the objective of explaining and illustrating the concept of materiality and at helping preparers of financial statements in applying the concept. It covers three main areas:

• characteristics of materiality;
• presentation and disclosure in the financial statements; and
• omissions and misstatements.

It also contains a short section on applying materiality when considering the recognition and measurement requirements of IFRSs.

ESMA “highly welcomes” the guidance.  It agrees with the IASB that the guidance is provided in a non-mandatory form as “in certain jurisdictions mandatory guidance on materiality could conflict with national legal requirements”.  However, in order to emphasise the nature of the guidance, ESMA “considers that the guidance should take the form of Implementation Guidance to IAS 1 Presentation of Financial Statements” rather than as a Practice Statement.

Regarding the assessment of determining whether information is material or immaterial, ESMA supports the conclusion that information can be material when considered together with other information even if not judged to be material in its own right.  ESMA also welcomes the guidance on both quantitative and qualitative assessments of materiality.

ESMA considers that the examples in the draft Practice Statement “are helpful to make the guidance more practical and useful”.  It also considers that “the draft Practice Statement is only a first step to improve the understanding and application of the principle of materiality in the IFRS financial statements” and welcomes further work by the IASB in this area within the Principles of Disclosure project.

The full comment letter is available on the ESMA website.