The International Accounting Standards Board (IASB) has published guidance on how to make materiality judgements. The Practice Statement encourages entities to apply judgement so that financial statements focus on the information that is useful to investors rather than trying to comply with an IFRS ‘checklist’.
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. However, management is often faced with uncertainty in applying that concept. Such uncertainty is encountered when making decisions about recognition and measurement but most of all when deciding what information to disclose in the notes and how to present that information.
This uncertainty has led to some entities using the disclosure requirements in IFRS Standards as a checklist rather than judging which information would be most useful to investors and other stakeholders.