In the Statement of Financial Accounting Concepts (SFAC) No. 8. SFAC No. 8 the position about materiality is that:
A) It should always be determined only through qualitative evaluations
B) It should always be determined through quantitative evaluations
C) It should always be determined by considering whether the amount affects past financial statements
D) It should be determined by how the magnitude of the item would be viewed by a reasonable person

Question

Quizplus · Accepted Answer

According to SFAC No. 8, materiality should be determined based on how the magnitude of the item would be viewed by a reasonable person. While qualitative and quantitative evaluations can be used as guidance, ultimately, the determination should be based on whether or not the item would influence the decisions of a reasonable person. The consideration of past financial statements is also not a requirement in determining materiality.