materiality principle

Definition

An accounting principle that states that financial reports only need to include information that will be significant (material) to their users. For example, an audit report would not need to specify the number of paper clips used by a bank. For a large corporation, an expenditure of a few thousand dollars would not be material, but for a smaller company it might be.

Use this term in a sentence

When creating financial reports it is important to remember the materiality principle and only include information that is relevant and important.

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