Materiality in interim reporting

Learning objectives

• Assess the materiality of an item (unusual item, change in accounting policy or estimate, error) in relation to the interim period financial data and not in relation to forecast annual results.L2

Normative references

• IAS 34 §23In deciding how to recognise, measure, classify or disclose an item for interim reporting, materiality is assessed in relation to the interim period financial data, recognising that interim measurements may rely on estimates to a greater extent than annual measurements.
• IAS 34 §25Judgement is still required, but the decision to recognise and disclose is based on the data for the interim period by itself: unusual items, changes in accounting policies or estimates, and errors are recognised and disclosed on the basis of materiality in relation to that data, to avoid misleading inferences; the overriding goal is to ensure that the report includes all information relevant to understanding the financial position and performance for the period.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• In an interim report, in relation to what is the significance of an item assessed when deciding how to recognise, measure, classify or present it?L2
• Fenwick SA forecasts an annual profit of EUR 12,000,000 (case data). Its profit for the half-year is EUR 1,800,000. In the half-year it paid an exceptional termination payment of EUR 400,000, an unusual item (case data). The finance director considers the item not significant "because it represents 3% of forecast annual profit". Write a short note on the significance of the item in the half-year report, distinguishing rule, case facts and professional judgement (the Standard sets no numerical threshold).L2