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The concept of materiality is important in the preparation of financial statements, because it helps companies determine which information to include in and exclude from their reports. Companies make materiality judgements not only when deciding what information to disclose and how to present it but also when making decisions about recognition and measurement.
Some companies are unsure about how to make materiality judgements and have therefore used the disclosure requirements in IFRS Standards as a checklist. To encourage behavioural change and provide support to companies making such judgements, the Board has issued IFRS Practice Statement 2 Making Materiality Judgements.
The Practice Statement gathers all the materiality requirements in IFRS Standards and adds practical guidance and examples companies may find helpful in deciding whether information is material. The Practice Statement is not mandatory and neither changes requirements nor introduces new ones.
The IASB has also published for public comment proposed amendments to the definition of 'material'. The ED Definition of Material proposes minor amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to clarify the definition and improve understanding of the current requirements.
The IASB is seeking comments on the ED by 15 January 2018.