generally accepted auditing standards reclass threshold

#Generally accepted auditing standards reclass threshold code#

The staff reminds registrants and the auditors of their financial statements that exclusive reliance on this or any percentage or numerical threshold has no basis in the accounting literature or the law. One rule of thumb in particular suggests that the misstatement or omission 2 of an item that falls under a 5% threshold is not material in the absence of particularly egregious circumstances, such as self-dealing or misappropriation by senior management. The staff is aware that certain registrants, over time, have developed quantitative thresholds as 'rules of thumb' to assist in the preparation of their financial statements, and that auditors also have used these thresholds in their evaluation of whether items might be considered material to users of a registrant's financial statements.

Question: Each Statement of Financial Accounting Standards adopted by the Financial Accounting Standards Board ('FASB') states, 'The provisions of this Statement need not be applied to immaterial items.' In the staff's view, may a registrant or the auditor of its financial statements assume the immateriality of items that fall below a percentage threshold set by management or the auditor to determine whether amounts and items are material to the financial statements? Because no item in the registrant's consolidated financial statements is misstated by more than 5%, management and the independent auditor conclude that the deviation from generally accepted accounting principles ('GAAP') is immaterial and that the accounting is permissible. When combined, the misstatements result in a 4% overstatement of net income and a $.02 (4%) overstatement of earnings per share. Assessing Materialityįacts: During the course of preparing or auditing year-end financial statements, financial management or the registrant's independent auditor becomes aware of misstatements in a registrant's financial statements. STAFF ACCOUNTING BULLETINS TOPIC 1: FINANCIAL STATEMENTS * * * * * M. Section M, entitled 'Materiality,' provides guidance in applying materiality thresholds to the preparation of financial statements filed with the Commission and the performance of audits of those financial statements. The staff hereby adds Section M to Topic 1 of the Staff Accounting Bulletin Series.

#Generally accepted auditing standards reclass threshold code#

They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.Īccordingly, Part 211 of Title 17 of the Code of Federal Regulations is amended by adding Staff Accounting Bulletin No.

20549-1103 electronic addresses: INFORMATION: The statements in the staff accounting bulletins are not rules or interpretations of the Commission, nor are they published asīearing the Commission's official approval. Fredrickson, Office of General Counsel (20), Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. Burns, Chief Counsel, Office of the Chief Accountant (20), or David R. Scott Bayless, Associate Chief Accountant, or Robert E. SUMMARY: This staff accounting bulletin expresses the views of the staff that exclusive reliance on certain quantitative benchmarks to assess materiality in preparing financial statements and performing audits of those financial statements is inappropriate misstatements are not immaterial simply because they fall beneath a numerical threshold.įOR FURTHER INFORMATION CONTACT: W. 99: MaterialityĪGENCY: Securities and Exchange CommissionĪCTION: Publication of Staff Accounting Bulletin