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Sep / dec 2016, question name Raven&Co, part (b), in military research, shouldnt it be material & pervasive ?
Because kaplan textbook says that
If so confined, represent or could represent a substantial proportion of the financial statements is considered pervasive
What does this substantial propotion mean ? Does it mean 50% of the materiality ?
I do not understand when an item is considered as pervasive when materiality of militarity project already surpasses 10%
Thank you.
I don’t understand the explanation you have copied from the text (and I don’t have a copy of the text), but please see here my explanation to a similar query https://opentuition.com/topic/poodle-june-13/
Hi tutor,
I ve written down some parts from the text.
It’s considered pervasive if
1. Effectd are not confined to specific elements, accountd or items of financial statements (fs); or2. If so confined could present or represent a substantial proportion of fs; or
3. Fundamental to users’ understanding of fs in relation to disclosures.
So when we see in no. 2, how do we determine that substantial proportion ?
For materiality, we can determine using percentage calculation but im not sure how we determine that ‘ substantial proportion’I did understand no 1 and 3 but number 2 is quite ambiguous
Thank you
You are not going to be asked to regurgitate explanations in a particular text. Simply understand that if you can say “except for this and except for that and except for the other. .. shows a T&F view” the FS as a WHOLE are still ok. Pervasive is extreme and related opinions exist more in theory than in practice.
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