Question

Materiality principle is an exception to which principle?

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Answer 1

Answer:

Materiality Principle requires that all relative items, knowledge of which might influence the decision of users of financial statements should be disclosed in the financial statements. It would be wrong to say that it is contradictory to full disclosure but is treated as an exception to full disclosure principle.

Answer 2

The Materiality principle is an exception to the principle of Full Disclosure.

• The materiality principle indicates that the financial statement should include in it all the aspects of the department which create an impact on the stakeholders/end-users of the department economically, financially, legally, or otherwise important.
• The materiality principle dictates that the information about those aspects which do not contribute to the decision-making of the stakeholders/end-users of the department economically, financially, legally, or otherwise and are, as such, non-essential; and the financial statement should not contain this unimportant information.
• The Full disclosure Principle argues that the financial statement should be all-inclusive of essential as well as non-essential information of the department, irrespective of their impact or influence on the financial, economic, and legal status of the department.
• Thus the Materiality principle is an exception to the principle of Full Disclosure.

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