29 March 2016

Corporate Reporting Dialogue publishes statement on materiality

The CRD, an initiative consisting of organisations with responsibility for setting standards or developing guidance for corporate reporting, has published a 'statement of common principles of materiality'.

The document compares materiality definitions and approaches by Corporate Reporting Dialogue (CRD) participants. CRD participants, whose definitions of materiality and approaches were compared, are Driving Sustainable Economies (CDP), Climate Disclosure Standards Board (CDSB), Financial Accounting Standards Board (FASB), Global Reporting Initiative (GRI), International Accounting Standards Board (IASB), International Integrated Reporting Council (IIRC), International Organization for Standardization (ISO) and Sustainability Accounting Standards Board (SASB).

The concepts in this paper represent common foundational principles believed to be broadly consistent with all forms of standards' development and business reporting to stakeholders. The paper demonstrates a commitment by participants to identify practical ways and means by which their respective frameworks, standards and related requirements can be aligned and rationalized.

Materiality is a general and pervasive concept and is widely used in financial and non-financial reporting and for many other business purposes. For example, business contracts may include ‘material adverse change’ clauses, which may or may not be financial in nature. In planning the audit of a corporation, an auditor will establish a materiality threshold for purposes of determining the scope of test procedures, which would be different from the materiality threshold the auditor will use for purposes of rendering the attest report on the fairness of the client’s financial statements taken as a whole. Materiality is frequently a legal concept as well because some countries, by either statute, case law or regulation, have established a definition of materiality they require to be applied in their jurisdiction. As an obvious consequence, it is not possible to establish a ‘one size fits all’ quantified definition of materiality.

Full press release

Full statement

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