Materiality Means User Decisions, Not Round Numbers
Assess lease accounting misstatements using quantitative size and qualitative decision relevance.
The move: ask what decision could change. Lease accounting teams often inherit percentage thresholds from audit planning. Those thresholds are useful, but they are not the definition of materiality. IFRS Practice Statement 2 frames materiality around information that could influence decisions of primary users of financial statements. That is why a lease error needs two lenses. The quantitative lens asks how large the error is relative to relevant measures: assets, liabilities, profit, EBITDA, covenant metrics, or segment results. The qualitative lens asks why this specific error matters in context. Does it change compliance with a covenant? Does it mask a…
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