• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exams

How was your exam? Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

Materiality

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › Materiality

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by Kim Smith.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 18, 2020 at 3:13 pm #595476
    toushiga
    Participant
    • Topics: 424
    • Replies: 172
    • ☆☆☆☆

    Hello Miss, under the PYQ March 2020 Q1(b)
    Why it’s possible the percentage is applied to one benchmark either based on total asset or revenue or profit before tax as some transaction affects either Pnl or SOFP only?

    which the examiner answer seems suggested that or am I misunderstanding it?

    “and it is acceptable to use a benchmark of 1% of total assets as a basis for materiality. However,this would normally be used for a capital-intensive business, not for a company like Daryl Co, which is service based.
    A percentage of profit is deemed an appropriate method of calculating materiality in a profit-making business.”

    Thank you.

    November 18, 2020 at 5:43 pm #595489
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8298
    • ☆☆☆☆☆

    For the evaluation of misstatements – the chosen benchmark has to be relevant to the misstatement that’s being assessed.
    If a misstatement affects profit – use profit – if it affects total assets – use total assets.

    Don’t use revenue if it doesn’t affect revenue – see an example here https://opentuition.com/topic/materiality-the-auditors-report

    When talking about just one overall materiality for the financial statements as whole, there is a potential problem for a business that offers services through resources that are not recognised on the statement of financial position – e.g. an ACCA tuition provider may not own any premises and its main resource is its tutors. So 1-2% of total assets might be trivial (and so not appropriate) as compared to 5-10% of profit or 0.5-1% of revenue.

    November 19, 2020 at 3:59 am #595513
    toushiga
    Participant
    • Topics: 424
    • Replies: 172
    • ☆☆☆☆

    So what does the examiner answer try to express for? Possible for one benchmark for whole FS?

    November 19, 2020 at 7:29 am #595520
    Kim Smith
    Keymaster
    • Topics: 133
    • Replies: 8298
    • ☆☆☆☆☆

    3rd sentence of the answer “A percentage is often applied to a chosen benchmark as a starting point in determining materiality for the financial statements as a whole …”

    Exhibit 4 says “Material will be …” “Materiality is ….” this must mean materiality for the financial statements as a whole. (If talking about performance materiality it would have to say “performance materiality”.)

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • Goodness on Accruals and Prepayments (part b) – ACCA Financial Accounting (FA) lectures
  • mrjonbain on What is Assurance? – ACCA Audit and Assurance (AA)
  • Ejueyitsi-Toju on What is Assurance? – ACCA Audit and Assurance (AA)
  • sadik.sadka on How to make the best use of OpenTuition
  • SONIC916 on Lessee accounting – ACCA (SBR) lectures

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in