The Concept of Materiality.
The article focuses on the concept of materiality in accounting. According to accounting principles, there should be a general presumption that all items of profit and loss recognized during a period should be included in the determination of net income. The only possible exception represents items that are in the aggregate material in relation to the company's net income and clearly not identifiable with or result from usually typical operations. Such items may be included from a determination of net income and further, they should be excluded when their inclusion will impair the significance of net income so that misleading inferences might be drawn therefrom. In the main categories of extraordinary items, practice is so diffused that the size of an item in relation to net income appears hardly to have any important effect on whether an item is included in or excluded from, the determination of net income. The concept of materiality, when generally expressed, is simple to understand. However, when it is made a central concept in the application of accounting principles, a lack of specific definition converts it into a prime problem area.
- DOI
- 10.2308/tar-4484393
- Volume
- 42 (1)
- Pages
- 86-95
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref