Limit search to available items
Book Cover
E-book
Author Bellandi, Francesco, author

Title Materiality in financial reporting : an integrative perspective / by Francesco Bellandi
Edition First edition
Published Bingley, UK : Emerald Publishing, 2018
©2018
Online access available from:
Emerald eBooks    View Resource Record  

Copies

Description 1 online resource (xxix, 411 pages) : illustrations
Contents Machine generated contents note: pt. I Introduction and Background -- Main Focus of Part I -- 1. Why Does Materiality Matter in Financial Statements? -- 2. Powerful and Dangerous -- 3. Disclosure Framework -- 4. Disclosure Initiative -- 5. Disclosure Effectiveness Initiative -- 6. Objectives of the Book -- pt. II Conceptual Bases of Materiality -- Main Focus of Part II -- 1. Materiality in the Conceptual Frameworks -- 1.a. Objective of Materiality -- 1.b. Level of Interaction in the Conceptual Frameworks -- 1.c. Pervasive Concept or a Qualitative Characteristic? -- 1.d. Is Materiality a Constraint? -- 1.e. Interaction with Qualitative Characteristics of Accounting Information -- 1.f. Materiality versus Relevance -- 1.g. Entity Specificity -- 1.h. Materiality versus Reliability and Faithful Representation -- 1.i. Completing the Picture: Materiality versus Completeness -- 1.j. Materiality versus Understandability -- 1.k. Does Prudence or Neutrality Affect Materiality? -- 1.l. Link to Recognition in the Conceptual Frameworks -- 1.m. Cost/Benefit Constraint versus Materiality -- 1.n. Impracticability versus Materiality -- 1.o. Significance -- 2. Definitions of Materiality -- 2.a. Can a Definition of Materiality Be Given? -- 2.b. Summary of Definitions -- 2.c. US Supreme Court's Definition -- 2.d. FASB (1985), CON 2 -- 2.e. SEC Rules and Regulations -- 2.f. Common Law -- 2.g. IASB Framework -- 2.h. Common Conceptual Framework -- 2.i. International Financial Reporting Standards -- 2.j. Auditing Standards -- 2.k. COSO Framework -- 2.l. AccountAbility -- 2.m. Integrated Reporting -- 2.n. WRI and WBCSD -- 3. Attributes of Materiality -- 3.a. Subject Matter -- 3.b. What Is an Item? -- 3.c. Item versus Its Content -- 3.d. Omissions or Misstatements -- 3.e. Material Disclosures of An Item versus Its Required Disclosures -- 3.f. Materiality Test from Users' Perspective -- 3.g. Materiality Test Contrasted with the Objective of General-Purpose Financial Statements -- 3.h. Materiality Test from the Standpoint of Objective Metrics -- 3.i. Addressees of Test -- 3.j. Reasonable Investor and Reasonable Person -- 3.k. Clusters versus Individuals -- 3.l. Primary versus Intended versus Other Users -- 3.m. Stakeholders versus Users -- 3.n. Assessor -- 3.o. Degree of Likelihood -- 3.p. Understanding Influence versus Influencing -- 3.q. Degree of Magnitude -- 3.r. Context -- 3.s. Degree of Specificity -- 3.t. Time Horizon -- Solutions and Recommendations -- Conclusion -- pt. III Actors and Models of Materiality -- Main Focus of Part III -- 1. Uses and Effects of Materiality -- 1.a. Is Materiality Exclusively a Legal Concept? -- 1.b. Are Legal and Accounting Definitions of Materiality Incompatible? -- 1.c. Practical Interactions of Legal and Accounting Concepts of Materiality -- 1.d. Different Nature of an Accounting Concept of Materiality -- 1.e. Quest for an Accounting Definition of Materiality -- 1.f. Materiality in Audit versus in Financial Statements -- 1.g. Other Uses of Materiality by Auditors -- 1.h. Materiality as a Managerial Concept -- 2. Who Decides about Materiality? -- 2.a. Who Allows Materiality? -- 2.b. Who Uses Materiality? -- 2.c. Who Decides Materiality? -- 2.d. Who Assesses Materiality? -- 3. Models of Materiality -- 3.a. Do We Need a Framework of Materiality? -- 3.b. Positive versus a Negative Concept -- 3.c. Discrete versus a Continuous Notion -- 3.d. Different Disclosure Regimes -- 3.e. Simulating User Decision Model -- 3.f. Probability/Magnitude Mapping -- 3.g. Severity of Deviancies -- 3.h. Range of Fluctuation -- 3.i. Opportunity Loss -- 3.j. Statistical Use of Information -- 3.k. Doctrine of Differential Disclosure -- 3.l. Expanded Dimensions of Materiality -- 3.m. Flexibility Zone -- 3.n. Eyes of Management versus Eyes of Investors -- 3.o. Ownership Triangle -- 3.p. Active versus Passive Role -- 3.q. Sender -- Receiver Distortion -- 3.r. U-Materiality -- 3.s. Objective versus Subjective Determination -- 3.t. Materiality as a Planning Tool -- 3.u. Consensus Materiality -- 3.v. Adjustment Method -- 3.w. From Materiality to Materiality Determination Process -- 3.x. Qualitative Factors -- 3.y. Zero Materiality -- Solutions and Recommendations -- Conclusion -- pt
Note continued: 1.j. What Is the Scope of Professional Judgment? -- 1.k. Who Is a Professional Judge? -- 1.l. When Is the Judgment Process Professional? -- 1.m. Documentation of Judgment -- 1.n. How to Evaluate Judgment Reasonableness? -- 1.o. Changes in Judgment and Reassessment -- 2. Quantitative Thresholds of Materiality -- 2.a. Thresholds for Whom? -- 2.b. Role of Quantitative Thresholds -- 2.c. Case of an Absolute Dollar Amount -- 2.d. When a Relatively Small Misstatement May Be Material -- 2.e. When a Large Misstatement Can Be Immaterial -- 2.f. Performance Materiality -- 2.g. Adjustment Method -- 2.h. Process Analysis of Materiality -- 2.i. Should the Management Use Materiality Set by Auditors? -- 3. Levels of Application of Materiality -- 3.a. Concept of Whole Financial Statements -- 3.b. Periods of Whole Financial Statements -- 3.c. Materiality at Lower Levels -- 3.d. Consolidated versus Entity or Separate Financial Statements -- 3.e. Component Materiality -- 4. Benchmarks -- 4.a. Common Benchmarks -- 4.b. Relative versus Absolute Measures -- 4.c. Rules of Thumbs Used in Practice -- 4.d. Choosing Benchmarks -- 4.e. Normalizing Benchmarks -- 4.f. Deciding Percentages -- 4.g. Volatility -- 4.h. Industry Type -- 4.i. Capital Structure -- 4.j. Company Life Cycle -- 4.k. Pervasiveness -- 4.l. Degree of Aggregation -- 5. Comparative Information -- 5.a. Basic Period in Focus -- 5.b. Materiality in Prior Period -- 5.c. Corresponding Figures versus Comparative Financial Statements Approach -- 5.d. Third Statement of Financial Position -- 5.e. Materiality in Future Periods -- 5.f. Uncorrected Immaterial Misstatements Adding Up to Materiality in the Current Period -- 5.g. Effect of Changes of Materiality Benchmarks -- 5.h. Effect of Misstatement of Comparative Information -- 5.i. Counterbalancing and Noncounterbalancing Misstatements -- 5.j. Structure of the Notes -- 5.k. Effect on Financial and Forensic Analysis -- 6. Estimates -- 6.a. Risk of Material Misstatement of an Accounting Estimate -- 6.b. Inherent Level of Imprecision of an Accounting Estimate -- 6.c. Linkage between Estimation Uncertainty and Materiality -- 6.d. Judgmental Misstatements -- 6.e. Linkage between Inherent Imprecision and Misstatements -- 6.f. Management Bias -- 6.g. Effect of Materiality on Changes in Estimates -- 6.h. Linkage between Materiality and Sources of Estimation Uncertainty -- 6.i. Critical Accounting Estimates -- 6.j. Effect on Reliability of Materiality of a Misstatement of Estimate -- 7. Individual versus Cumulative Misstatements -- 7.a. Analysis at Individual Item Level -- 7.b. Analysis at a Cumulative Level -- 7.c. Offsetting Misstatements -- 7.d. Aggregation Technique and Absolute Value -- 7.e. Trends and Ratios -- 8. Verification -- 8.a. Assessing Decisions -- 8.b. Documentation -- 8.c. Approaches to Verify Materiality Ex Post -- 8.d. Implication in Terms of Accounting Changes -- 8.e. Methods to Assess Estimates -- 9. Immaterial Misstatements -- 9.a. Does GAAP Really Not Apply to Immaterial Items? -- 9.b. Are Misstatements of Immaterial Items Errors? -- 9.c. Intentional Immaterial Misstatements -- 9.d. Does Intention Make a Misstatement Always Material? -- 9.e. How to Judge Intentions? -- 9.f. Difference between Achieving a Particular Presentation and Influencing Users -- 9.g. Investigating the Objective Element -- 9.h. Policy to Ignore Immaterial Misstatements -- 9.i. Are Immaterial Misstatements Relevant to an Audit? -- 9.j. Material Effect of Accumulation of Immaterial Errors -- 9.k. Correction of Immaterial Errors -- 9.l. Tone from the Top -- 9.m. Legal Consequences -- 9.n. Summary of Treatment of Errors -- 10. Assessing Materiality in Interim Reporting -- 10.a. Reference Period of Materiality under IFRS -- 10.b. Reference Period of Materiality under US GAAP -- 10.c. Materiality in Interim Reporting for Correction of Errors -- 10.d. Materiality in Interim Reporting for Changes in Estimates and Changes in Accounting Policies -- 10.e. Relationship between Materiality to Interim and to Annual Financial Statements -- 10.f. Relationship between Estimation Uncertainty and Materiality in Interim Periods -- 10.g. Materiality for the Condensed Format of Interim Financial Statements -- 10.h. Audit Considerations -- 10.i. Interim Periods in MD & A -- 11. Assessing Materiality in Segment Reporting -- Solutions and Recommendations -- Conclusion -- pt. VI Materiality Determination Process -- Main Focus of Part VI -- 1. Processes and Methods -- 1.a. Linkage to the Judgment Process -- 1.b. Frameworks to Determine Materiality -- 2. Accounting-derived Approaches -- 2.a. Qualitative Factors -- 2.b. IASB's Four-Step Approach -- 3. Audit-derived Approaches -- 3.a. Audit Procedures -- 3.b. Audit Red Alerts -- 3.c. Materiality Benchmark Selection -- 3.d. Analytical Procedures -- 4. Risk-derived Approaches -- 4.a. Risk-Level Graphs -- 4.b. Heat Maps -- 5. Approaches Derived from Larger Frameworks -- 5.a. Materiality Determination in Integrated Reporting -- 5.b. Materiality Determination in AA1000 -- 5.c. Materiality Matrix -- 5.d. Five-Part Materiality Test -- 5.e. Significance/Influence Matrix -- 5.f. Materiality Map -- 6. Disclosure of the Materiality Process -- 6.a. Integrated Reporting Disclosures of the Materiality Process -- 6.b. GRI Disclosures of the Materiality Process -- 7. Model Disclosures of Material Matters -- 7.a. General Disclosures in Accounting Standards -- 7.b. General Disclosures in Audit Standards -- 7.c. Disclosure of Material Matters in Integrated Reporting -- 7.d. Disclosure of Material Aspects in Sustainability Reporting -- 7.e. ITAC Principles-based Disclosures -- Solutions and Recommendations -- Conclusion -- pt. VII Where Standard Specifically Require Materiality Judgments -- Main Focus of Part VII -- 1. Is Materiality Standard-Specific? -- 2. What Standards Say Users Want -- 3. Notion of Inconsequential or Perfunctory -- 4. Materiality Applied to Specific Unit of Account -- 4.a. Materiality to Assess Performance Obligations -- 4.b. Materiality of a Financing Component -- 4.c. Materiality of a Customer Option -- 5. Related Parties -- 6. Materiality Applied to Specific Items or Circumstances -- Solutions and Recommendations -- Conclusion -- pt
IV Application of Materiality -- Main Focus of Part IV -- 1. Materiality Applied to Recognition and Measurement -- 1.a. Does Materiality Apply to Recognition and Measurement? -- 1.b. Inapplicability by Analogy -- 1.c. De Minimis -- 1.d. Significant Accounting Policies -- 1.e. Accounting Policies with Immaterial Effects -- 1.f. Scope of a Change in Accounting Policies -- 1.g. Materiality in Disclosing Voluntary Changes in Accounting Policies -- 1.h. Materiality in Disclosing Involuntary Changes in Accounting Policies -- 1.i. Case of Accounting Errors -- 2. Materiality Applied to Presentation and Disclosure -- 2.a. Does Materiality Apply to Presentation and Disclosure? -- 2.b. Item versus Information of An Item -- 2.c. Required Disclosure of Immaterial Information -- 2.d. Allowed Disclosure of Immaterial Information -- 2.e. Disclosure Overload Debate -- 2.f. Obscuring Material Information -- 2.g. Minimum Set of Required Disclosures -- 2.h. Classification -- 2.i. Interaction of Aggregation and Disaggregation of Information -- 2.j. Top-down Model of Disaggregation in the Financial Statements -- 2.k. Bottom-up Model of Aggregation in the Financial Statements -- 2.l. Classes of Aggregation -- 2.m. Alternative Model of Aggregation in the Financial Statements -- 2.n. General Models of Disaggregation for Disclosure Purpose -- 2.o. Review Assessment -- 2.p. Quality of Disclosure -- 2.q. Material Items -- 2.r. Disclosure Objectives -- 2.s. Gains and Losses -- 2.t. Effect of Measurement Bases -- 2.u. Third Statement of Financial Position -- 2.v. Rounding -- 2.w. When Required Disclosure Is Not Enough -- 3. Materiality Applied to Management Commentary -- 3.a. Management Commentary versus the Notes -- 3.b. Views of Materiality in Management Commentary -- 3.c. Material Known Trends or Uncertainties in SEC's MD & A -- 3.d. Material Changes -- 3.e. Critical Accounting Estimates in MD & A -- 3.f. Immaterial Information in MD & A -- 3.g. Segment Analysis -- 3.h. Layered Disclosure -- 4. Does Materiality Apply to Bookkeeping? -- 4.a. Bookkeeping versus Financial Statements: A Separate Perspective -- 4.b. Bookkeeping versus Financial Statements: An Integrated Perspective -- 4.c. Direct Impact on Financial Statements of Bookkeeping Errors -- 4.d. Indirect Impact on Financial Statements of Bookkeeping Errors -- 4.e. Delicate Link to Intentional Immaterial Errors -- 4.f. Immaterial Misstatements versus Bookkeeping Errors -- 4.g. Can Immaterial Bookkeeping Errors Be Left Uncorrected? -- 4.h. Does Materiality Apply to Bookkeeping? -- 4.i. Reasonableness versus Materiality -- 4.j. Legal Implications -- 4.k. Should Accountants Care of Materiality at All? -- 5. Materiality in Auditing -- 5.a. Audit Definition of Materiality -- 5.b. Definition of Material Misstatement -- 5.c. Risk of Material Misstatements and Assertions -- 5.d. Relationship between Audit Risk and Materiality -- 5.e. Iteration of Materiality and Inherent Risk -- 5.f. Second-Guessing Management's Determination of Users' Needs -- 5.g. Timing of Auditor's Consideration of Materiality -- 5.h. Undetected, Identified, Uncorrected, and Corrected Misstatements -- 5.i. How Materiality Affects Auditors' Responses to Misstatements -- 5.j. How Materiality Affects Auditors' Responses to Fraud -- 5.k. How Materiality Affects Auditors' Responses to Illegal Acts -- 5.l. Communications with the Management, Internal Auditors, and Audit Committee -- 6. Materiality Applied to Internal Control Over Financial Reporting -- 6.a. Internal Control over Financial Reporting versus Audit -- 6.b. Materiality and Technical Classifications of Internal Control Deficiencies in SOX -- 6.c. Materiality and Internal Control Deficiencies in COSO Framework -- 6.d. Materiality in PCAOB Audit Standard for ICOFR -- 6.e. Definition of Risk -- 6.f. Risk Tolerance -- 6.g. Risk Appetite -- 6.h. Risk Appetite and Risk Tolerance in the Context of Corporate Guidance Systems -- 6.i. Interlock of Risk, Risk Appetite, Risk Tolerance, and Precision of Internal Controls -- 6.j. Relationship between Risk Tolerance and Materiality -- 6.k. Planned Materiality versus Risk Tolerance and Performance Materiality -- 6.l. Relationship between Risk Tolerance and Precision of Controls -- 6.m. Inherently Imprecise Controls -- 6.n. Other Drivers of the Precision of Controls -- 6.o. Importance of Immaterial Misstatements in ICOFR -- 6.p. Documentation of Determination of Immateriality -- 6.q. Role of Materiality in Testing ICOFR -- 6.r. Management Review Controls -- Solutions and Recommendations -- Conclusion -- pt. V Assessing Materiality -- Main Focus of Part V -- 1. Types of Assessment and Professional Judgment -- 1.a. Quantitative versus Qualitative Criteria -- 1.b. Is Quantitative an Assurance? -- 1.c. Is Magnitude Exclusively a Quantitative Concept? -- 1.d. What Is the Meaning of Qualitative? -- 1.e. When a Qualitative Assessment Is Always Required -- 1.f. When a Fact Is Always Material -- 1.g. Management Discretion -- 1.h. Auditor and Other External Professional Judgment -- 1.i. How Can the Management Judgment Be Professional?
VIII Accounting Materiality in the Real World -- Main Focus of Part VIII -- 1. Materiality Paradox -- 2. Improvement of the Effectiveness of Financial Statements: The Standard-Setters' View -- 3. Behavioral Issues -- 4. Is There Something Missing? -- 5. Materiality Comments on SEC Staff IFRS Reviews -- 6. Typical Materiality Abuses by Management -- 6.a. Uses and Misuses of Materiality -- 6.b. Failure to Disclose -- 6.c. Below Materiality Threshold -- 6.d. Setting Materiality High -- 6.e. Ignoring Aggregation Risk -- 6.f. Aggregated Benchmarks -- 6.g. Offset -- 6.h. Static versus Dynamic Benchmarks -- 6.i. Income Statement Orientation -- 6.j. Presentation versus Disclosure Game -- 6.k. Change in Materiality Game -- 6.l. Undue Cost or Effort or Impracticability -- 6.m. Contra-Asset and Provision Items -- 6.n. Income Shifting -- 6.o. Unbundling Misstatements -- 6.p. Statements Were Audited -- 6.q. Absolute Amounts -- 6.r. Too Difficult to Understand -- 6.s. Too Far in Time -- 6.t. Agency Conflicts -- 6.u. Management Commentary -- 6.v. Watering Information -- 6.w. Reclassifications and Continuous Restatement -- 6.x. Change in Judgment -- 6.y. Entity's Circumstances Are Different -- 6.z. Focus on Consolidated Financial Statements -- 6.aa. Delegation to a Service Organization -- 6.bb. Shooting a Moving Target -- 6.cc. Persistent Behaviors -- 6.dd. Manual Adjustments -- 6.ee. Incorrect Bookkeeping -- Solutions and Recommendations -- Conclusion
Bibliography Includes bibliographical references (pages 373-396) and index
Notes Print version record
Subject Financial statements.
Materiality (Accounting)
Form Electronic book
ISBN 1787437361 (ebk)
9781787437364 (ebk)