Information is considered material if:
A)it would have a bearing on decisions of those who use the financial statements.
B)there is a substantial likelihood that a reasonable investor would not be concerned about the information.
C)an item is so insignificant that users would likely ignore it.
D)the FASB explicitly rules the transaction or item to be material.

Question

Quizplus · Accepted Answer

Materiality of information is judged based on whether it could impact the decisions of the users of financial statements. Thus, choice A is correct as it captures this concept. Choice B is incorrect as materiality is not based on the likelihood of concern for a reasonable investor. Choice C is incorrect as even insignificant information may be material if it could impact user decisions. Choice D is incorrect as the FASB does not explicitly determine materiality but provides guidance for its assessment.

Information Is Considered Material If