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Disclosure Initiative - Definition of Material


Project History

On 14 September 2017, the IASB published Exposure Draft ED/2017/6 Definition of Material – Proposed Amendments to IAS 1 and IAS 8 ('the ED') with a comment period of 120 days.  The ED refines the definition of material to:

  • align the wording of the definitions in IAS 1, IAS 8 and the definition in the Conceptual Framework for Financial Reporting (the Conceptual Framework)—the wording is currently similar but not identical;
  • incorporate some of the existing supporting requirements in IAS 1 into the definition to give them additional prominence (including "obscuring information", "could reasonably be expected to influence") and
  • improve the clarity of the explanation accompanying the definition of material.

On 2 October 2017, EFRAG issued its draft comment letter where it supported the objective to remove the existing inconsistencies in the definition of "material" in the Conceptual Framework for Financial Reporting and in IFRS Standards. EFRAG also supported replacing the threshold 'could influence' with 'could reasonably be expected to influence'.

However, EFRAG suggested removing the references to 'omitting', 'misstating' and 'obscuring' from the definition of 'material' and defining material information more simply and directly as information that can reasonably be expected to, individually or collectively, influence the economic decisions that the primary users of financial statements make.

On 23 January 2018 EFRAG issued its Comment Letter essentially reiterating the above views and Feedback Statement describing the main comments received and how these comments were considered by EFRAG in finalising its comment letter to the IASB.

On  31 October 2018, the IASB issued  the amendments to its definition of material. The amendments retain most of the proposals in the exposure draft.  The changes are effective from 1 January 2020, but entities can decide to apply them earlier.





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