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FASB proposes improvements to materiality guidance

  • FASB document Image

Sep 24, 2015

As part of its disclosure framework project, the FASB has issued a proposed Accounting Standards Update (ASU), “Assessing Whether Disclosures Are Material,” and a proposed concepts statement, “Conceptual Framework for Financial Reporting Chapter 3: Qualitative Characteristics of Useful Financial Information.”

Under the proposed ASU, materiality would be described as a legal concept (i.e., the concept defined by the U.S. legal system) and “would be applied to quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements as a whole.” Further, this proposal would indicate that the omission of disclosures about immaterial information is not an accounting error.

The proposed concepts statement would amend the discussion of materiality in chapter 3 of FASB Concepts Statement 8 by (1) removing the existing definition of materiality, (2) indicating that “materiality is a legal concept”, and (3) adding a summary of the U.S. Supreme Court’s current description of materiality (i.e., “information is material if there is a substantial likelihood that the omitted or misstated item would have been viewed by a reasonable resource provider as having significantly altered the total mix of information.”)

Comments on both proposals are due by December 8, 2015.

For more information, see Deloitte's related Heads Up newsletter as well as the press release and FASB in Focus newsletter on the FASB’s Web site. 

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