On November 8, 2017, the Financial Accounting Standards Board (FASB) dropped its proposal to amend the U.S. GAAP's definition of "materiality" to match the legal interpretations used by regulators and courts. The idea was originally proposed in September 2015 but was met by heavy criticism and the change was never officially made. The change would have provided businesses with more freedom in determining what information to include in their financial statement footnotes. The root of the criticism came from investors who believed that a change to the definition would err on the side of giving businesses too much freedom by allowing them to omit important information from financial statements, ultimately preventing the information from being made public. During the recent FASB meeting, the FASB chose to return to the definition of materiality from FASB Concepts Statement No. 2, Qualitative Characteristics of Accounting Information (superseded), which defines materiality in the context of "the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement." The FASB stated that this definition is consistent with the one used by the Securities and Exchange Commission, the Public Company Accounting Oversight Board (PCAOB) and the American Institute of Certified Public Accountants (AICPA). For more information, see http://www.fasb.org/jsp/FASB/FASBContent_C/ActionAlertPage&cid=1176169442224&rss=1.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.