"Materiality is a subjective term "discuss.
Answers
The materiality concept refers to a situation where the financial information of a company is considered to be material from the point of view of the preparation of the financial statements if it has the potential to alter the view or opinion of a reasonable person. In short, all that financial information that is likely to influence a knowledgeable person’s judgment should be captured in the preparation of the financial statements of the company. The materiality concept in accounting is also known as materiality constraint.
The concept of materiality in accounting is very subjective, relative to size and importance. Financial information might be of material importance to one company but stand immaterial to another company. This aspect of the materiality concept is more noticeable when the comparison between companies that vary in terms of their size i.e., a large company vis-à-vis a small company. A similar cost may be considered to be the large and material expense for a small company, but the same may be small and immaterial for a large company because of their large size and review
As such, it can be said that the main objective of the materiality concept in accounting is to assess whether the financial information under consideration makes any significant impact on the opinion of the financial statement users. If the information is not material, then the company does not need to worry about including it in their financial statements
. The financial statement users
mentioned here can be auditors, shareholders, investors, etc
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Answer:
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Explanation:
ans. It is to be understand by materiality is a subjective concept that guides a company to identify and disclose only those transactions which are sufficiently large compared to operation of the company such that it would concern the user of the financial statement of the company