ESMA publishes summary of responses to its consultation on materiality in financial reporting

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17 Aug 2012

The European Securities and Markets Authority (ESMA) has published a summary of the responses received on its consultation paper on materiality in financial reporting. One of the main results of the consultation was that there is a potential need for further guidance on the application of the concept of materiality but that this issue should be addressed by the IASB, rather than ESMA.

In November 2011, ESMA published a consultation paper in order to seek comments from interested parties on their understanding of various aspects of materiality in an effort to contribute to a consistent application of this important concept in financial reporting. ESMA made available all comments received on the consultation paper in April 2012 and has now consolidated these into a summary of responses.

The main findings are:

  • The majority of all respondents believe that the concept of materiality is generally well understood, however, they see diversity in application.
  • Diversity in application was attributed to management judgement, separate perspectives of different stakeholder groups, and general difficulties in applying the concept to certain issues.
  • Many respondents believe that the application of materiality concept to disclosures could help address the problem of too many disclosures obscuring the reporting about an entity’s financial position and performance.
  • The majority of respondents were of the opinion that the principles to be applied in assessing materiality in interim and annual financial reports should be the same.
  • Respondents clearly indicated that if there is a need for further guidance on the application of the concept of materiality this issue should be addressed by the IASB.

Please click for access to the full summary of responses (link to ESMA website).

ESMA has decided to organise a public roundtable on materiality in financial reporting where some of the issues raised in the consultation paper will be further discussed. The roundtable will be held on 1 October 2012 in Paris. Please click for further information (link to ESMA website).

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