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I have always been confused about what materaility rates to calculate in the exam.
What percentage range do you suggest.
And how should we show the calculation working?Also we cant be expected to calculate performance materiality right?
Hope to hear from you soon
RegardsWhy not use the “standard” measures of .5 – 1%, 1 – 2%, and 5 – 10% of revenue, assets and profits
Lisa is not likely to give you an amount to consider which lies so close to lower limit that it becomes a matter of professional judgement – she will more likely give you doubtful activities which are clearly material – either quantitatively or qualitatively
And, no, you are not likely to be asked to calculate a performance materiality threshhold
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Thanks for the reply.
Would showing the working of materiality calcualtion be worth a mark?
Should we actually do the working in the answer or just say that “the item is clearly material”?
Regards
Why not “The amount is clearly material being 15% of the revenue figure” So quantify it within your recognition that it is material
Do we need to calculate all 3 materiality levels (revenue, assets, net profit) and if yes, what if one contradicts the other?
Thanks!
An item is material if it passes the threshold of any one of the three.
Probably at least one of the three will be not applicable so no need to calculate – instead state that, because it is irrelevant, you haven’t calculated it
Hi i seem to notice that MikeLittle wants candidates to calculate only those that are relevant and state reason for not calculating those that are irrelevant ?
so if i calculated revenue and total asset portion and not PBT amount, do i need to explain in the answer for not calculating PBT ?
No you do not – that would be a waste of time and not answer the question set. If you are commenting on the factors, for example, and one of the factors is materiality – you need to properly assess materiality. You don’t need to waste time saying – “oh, and by the way, I did not calculate this based on xxx because that would have been meaningless”.
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