ESMA Consultation Paper - Considerations of materiality in financial reporting
- Rasmus Sommer
In November 2011 ESMA issued a consultation paper on materiality in financial reporting.
In its comment letter EFRAG welcomed the debate on the concept of materiality and its application encouraged by ESMA's consultation paper. EFRAG noted that under the Conceptual Framework 'materiality' is an aspect of relevance underscoring the need for the financial statements to provide information that is useful to users for economic decision-making.
EFRAG believed that materiality judgements should not be made in isolation, and that it was important that surrounding circumstances always be taken into account. Accordingly, whilst quantitative thresholds were helpful in highlighting the areas that need to be considered, they should never be applied mechanically without relevant qualitative factors being taken into account.
A key message in the comment letter was that should the need for further clarification emerge from this debate, EFRAG believed it was the role of the IASB to provide the guidance. In EFRAG's view, that did not diminish, but supported the critical role of ESMA to ensure consistent application across the European Union of IFRS as defined globally.