On 28 October 2015, the IASB issued the Exposure Draft ED/2015/8 IFRS Practice Statement: Application of Materiality to Financial Statements (the ‘Exposure Draft’).
The objective of the Exposure Draft is to provide guidance to assist management in applying the concept of materiality to general purpose financial statements prepared in accordance with International Financial Reporting Standards (IFRS).
In its comment letter, EFRAG supports the objective to provide non-mandatory application guidance on materiality and considers that such guidance could be helpful, in particular in the context of disclosures, in order to provide a common ground for applying judgement in deciding which information is relevant for users and fostering thinking on how materiality is applied.
However, EFRAG considers that the objectives of the guidance should be clarified to state that the practice statement can be useful, beyond preparers, to promote a common understanding of the role and application of materiality by all those involved in the issue of financial statements.
EFRAG also considers that the guidance should be drafted in a more concise and practical way and focus on areas where it is most difficult to exercise judgement on the application of materiality; in particular how materiality is applied in line with the specific roles of the primary financial statements and of the notes.
The feedback statement describes the main comments received by EFRAG in response to the draft comment letter and how these comments were considered by EFRAG in finalising its comment letter to the IASB.