ESMA Summarizes the Consultation Document on Materiality
The ESMA has summarized the entire responses it has received with regard to its consultation document based on financial reporting materiality. The consultation paper revealed its primary results, which mainly revolved around the fact that additional guidance on the concept of materiality’s application is required. It also pointed that the IASB should address this particular issue instead of ESMA addressing it.
In 2011 November, the European Securities and Markets Authority had released a consultation document in their bid to gather comments/suggestions from those parties who were interested in sharing their opinions based on their knowledge and understanding of different features of materiality in order to give their contribution to a persistent application of this fundamental in finance related reporting.
ESMA provided the complete list of comments that it has received with regard to the consultation document in the month of April in the year 2012 and has consolidated the comments in the form of a summarized response now.
The primary findings of the consultation documents are:
Almost all the respondents are of the opinion that the materiality concept is usually well understood but they have also spotted diversity in the application of the same.
Application diversity was ascribed to management related judgement, different perspectives of various groups of stakeholders as well as general problems in the application of concept to particular issues.
Several respondents are of the opinion that the application of the concept of materiality to disclosures can help in addressing the difficulties of a number of disclosures concealing the reporting of a company’s financial performance and position.
A number of respondents opined that the application of principles in the assessment of materiality in annual as well as interim finance reports must be similar.
Many of them also stated that when the requirement for additional guidance/suggestion arises then the IASB should address the materiality concept.
ESMA is planning to organize a public meeting on the concept of materiality in finance reporting in order to discuss a couple of issues. The meeting will take place in Paris in the month of October 2012. Those who need additional details can visit ESMA website to collate desired information.