- This topic has 1 reply, 2 voices, and was last updated 6 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- The topic ‘Mar/Jun 2017 4(c) Materiality’ is closed to new replies.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Mar/Jun 2017 4(c) Materiality
Hello Mike,
I am reading the sample answer to the question, and I am confused on the below regarding materiality.
“The year end provision represents 0.36% of total assets and 6.54% of profit. It is not, therefore, material to the statement of financial position but material to the statement of profit or loss.”
My question is “the year end provision balance ($7m) is a balance sheet item, why the sample answer divided it by profit (ie. 7/107) and to determine the materiality (6.54%) to profit?”
Thank you.
Regards,
Marthew
Were that provision not to exist, profit for the year would increase by 6.54% … and that’s material
Many figures appear both on the statement of financial position and are involved witht he statement f profit or loss
For example:
Inventory
Depreciation
Provisions for doubtful debts (and other provisions)
Accruals and prepayments
The application of calculations to determine materiality can (and should) consider the affect on all statements that are affected by the matter in hand
OK?