On 29 November 2019, Amendments to IAS 1 and IAS 8 Definition of Material were endorsed by the European Commission for use in the European Union. The EU effective date is the same as the IASB’s effective date (annual periods beginning on or after 1 January 2020). Earlier adoption of Amendments is permitted.
Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors were issued in October 2018.
The definition of material, an important accounting concept in IFRS Standards, helps companies decide whether information should be included in their financial statements. The amendments are not intended to alter the underlying concept of materiality in IFRS Standards but only refine its definition.
The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition.
New definition of ‘material’: Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency.
The amendments are applied prospectively for annual periods beginning on or after 1 January 2020, with earlier application permitted.
We informed you in detail about these amendments in the Accounting News in December 2018.
Sources: www.iasplus.com, Amendments to IAS 1 and IAS 8