What is materiality? The AICPA definition of materiality changes
Typical bases for such calculations include 5% of profit before tax or 2-3% of operating income or EBITDA. For example, materiality levels employed by financial institutions sometimes equate to 1% of assets or equity. The materiality concept, also called the materiality constraint, states that financial information is material to the financial statements if it would change the opinion or view of a reasonable person. In other words, all important financial information that would sway the opinion of a financial statement user should be included in the financial statements. However, if the amount of…continue reading →