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Hello Kim,
When calculate materiality, why in the solution the examiner used “year end provison balance/Profit” (ie. 7/107 = 6.54%) to determine whether it is material to profit?
Why do not use “the change in provision value/profit” (ie. 4.5/107 = 4.21%), therefore not material to profit?
Thank you.
Regards,
MarthewOnly a small amount of the provision has been used and more than 25% has been reversed as no longer required – so we are looking at the maximum potential impact the balance has on the financial statements – if it was not required (at all) it would be written back in full.
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