If the FASB's proposed definition of materiality as a legal concept is adopted the most likely outcome is
A) It will have little impact on the number of items classified as material
B) It will lower the threshold for recognizing event and transactions as material
C) It will raise the threshold for recognizing event and transactions as material
D) Its impact cannot be determined

Question

Quizplus · Accepted Answer

If the FASB's proposed definition of materiality as a legal concept is adopted, it would raise the threshold for recognizing events and transactions as material because legal materiality considers whether the information would have been significant to a reasonable person. This is a higher threshold than the current practice of using a company-specific approach to determine what information is material. Ultimately, this may result in fewer items being classified as material.

If the FASB's Proposed Definition of Materiality as a Legal