Which of the following exemplifies "materiality" as the term is used in the FASB conceptual framework?
A)BCC Corporation purchased a $30 wastebasket with an expected useful life of 10 years.BCC charged the entire cost to expense in the period incurred.
B)Reported account balances in DPT Corporation's financial statements are rounded to the nearest whole dollar.
C)Both BCC Corporation purchased a $30 wastebasket with an expected useful life of 10 years.BCC charged the entire cost to expense in the period incurred and reported account balances in DPT Corporation's financial statements are rounded to the nearest whole dollar.
D)Neither BCC Corporation purchased a $30 wastebasket with an expected useful life of 10 years.BCC charged the entire cost to expense in the period incurred nor reported account balances in DPT Corporation's financial statements are rounded to the nearest whole dollar.

Question

Quizplus · Accepted Answer

Materiality in the FASB conceptual framework refers to the importance of information in influencing the decisions of users of financial statements. Both examples given, the expensing of a low-cost item despite its useful life (A) and the rounding of account balances (B), illustrate practices that reflect materiality considerations. In both cases, the actions are based on the judgment that the details omitted (the capitalization of a small asset or the exact cents in a balance) would not significantly influence the decision-making of the users of the financial statements.

Which of the Following Exemplifies "Materiality" as the Term Is