Observance of Materiality in Financial Statements: Theoretical and Practical Aspects

Annotation. Introduction. Observance of materiality in financial reporting allows interested parties to obtain complete, accurate and timely information on the activities of the entity. The level of materiality is established by the enterprise independently taking into account the norms of the current regulatory framework and is approved in the accounting policy. Only under this condition, information about the company’s activities will be of high quality, and stakeholders will be able to obtain complete, accurate and timely information. Purpose. The purpose of the article is to study compliance with current legislation regarding the consideration of materiality in financial reporting by analyzing the Order on accounting policies in terms of approving it on values of materiality for objects of accounting and business operations. Results. The article examines the accounting policies of existing enterprises to reflect the qualitative and quantitative indicators of materiality, as well as the presence of a separate paragraph on materiality. The requirements of two normative documents are analyzed, which establish the quantity and qualitative indicators of materiality that employees of the accounting staff must take into account when preparing financial statements and disclosing information about the activities of the enterprise. Conclusions. A comparison of the requirements of regulations on the establishment of quantitative and qualitative characteristics of materiality showed that the same objects of accounting have different limits of materiality. As a result, accounting staff may manipulate the information in the financial statements. In order to avoid differences in regulations, we propose to harmonize the rules. According to the current legislation, quantitative criteria and qualitative signs of materiality of information about the objects of accounting and business transactions must be approved in the Order on the accounting policy of the enterprise. During the study it was found that in practice, employees of the accounting staff, in most cases, do not attach importance to the proper value. Because only one of the studied Orders about accounting policy contained information on quantitative and qualitative characteristics of materiality completely in accordance with the law. In other Orders, it was either absent or contained in various sections, which complicated the process of obtaining materiality of information. Therefore, we recommend to provide quantitative criteria and qualitative indications of the materiality of the information in a separate section “Materiality of objects of accounting and business transactions” of the Order on accounting policy. Keywords: materiality; financial statements; accounting policies; material information; accounting.