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ACCA Strategic Professional · Strategic Business Reporting (International) · Other reporting issues

Under IFRS Practice Statement 2, which statement about materiality judgements when preparing group consolidated financial statements is correct?

Materiality for consolidated statements is judged at group level by reference to the decisions of primary users of those statements. An item can be immaterial to the group yet material to a subsidiary's own statements. Materiality must be reassessed each period.

  1. AMateriality is assessed by reference to the primary users of the consolidated statements, so an item immaterial to the group may be left out even if material to a subsidiary's own statementsCorrect
  2. BMateriality must be set at subsidiary level and then summed to give group materiality
  3. CMateriality is applied to the parent's separate statements only and not to the consolidated statements
  4. DOnce an item is immaterial to the group in one year, it must be treated as immaterial in all future years

Explanation

Materiality is entity-specific and judged for the statements being prepared, based on what could influence the decisions of primary users. Group statements are judged at group level. Immaterial items may change in later years if circumstances change, so the last option is wrong.

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