Defining Issues | August 2018

FASB adds to concepts statement with guidance on materiality and disclosures

Filed under: Presentation


KPMG reports on the release of the disclosure framework chapter of Concepts Statement No. 8, and amendments to the qualitative characteristics chapter. The FASB has reinstated guidance on the concept of materiality and has also issued the Board’s decision process for determining required disclosures.


Statement of Financial Accounting Concepts No. 8, Conceptual Framework for Financial Reporting

Chapter 3: Qualitative Characteristics of Useful Financial Information

Chapter 8: Notes to Financial Statements

  • All companies

Relevant dates

  • Effective immediately 
  • Because Concepts Statements are nonauthoritative, there is no explicit effective date. However, the guidance will immediately begin informing future standards-level projects

Key impacts

Chapter 3 of Concepts Statement No. 8 (amended):

  • Addresses the qualitative characteristics of useful financial information
  • Defines materiality consistent with the definition used by the SEC, PCAOB, AICPA and the US judicial system. The amended definition reinstates the guidance that was previously in Concepts Statement No. 2, Qualitative Characteristics of Accounting Information
  • Includes guidance on the difference between materiality and relevance, the evaluation of the omission of information and who can properly make judgments about materiality
  • The Board decided not to amend ASC 235, Notes to Financial Statements, to address assessing whether disclosures are material because materiality for the entire Codification is already addressed in ASC 105

Chapter 8 of Concepts Statement No. 8: 

  • Provides a decision-making framework for the FASB to follow when determining required disclosures in standards-level projects
  • Summarizes the types of information and certain limitations on that information that should be considered by the Board for determining the information to be included in the notes to the financial statements
  • Includes a list of decision questions to assist the Board and the FASB staff in developing potential disclosure requirements

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