Accountancy Europe fully supports the International Public Sector Accounting Standards Board’s (IPSASB) three phase approach to develop guidance on making materiality judgements when preparing public sector general purpose financial reports (GPFR) in accordance with IPSAS and IPSASB SRS Standards.
We have pleasure in presenting our formal response to the first phase of this project, Exposure Draft 93, Definition of Material.
In the response we broadly agree with the revised definition of material as “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the discharge of accountability by the entity, or the decisions that primary users make on the basis of the entity’s general purpose financial statements prepared for that reporting period.”
In particular, we support the addition of “discharge of accountability” to this definition as being particularly relevant to the public sector. The primary users are identified in the IPSASB Conceptual Framework as “service recipients and resource providers” – fundamentally “citizens” – and their representatives. For these primary users, “accountability” would often require the consideration of non-financial implications (such as the effectiveness of service delivery) that should assist the understanding of how the public sector entity has performed against its service mandate.
However, we are not convinced that the proposed clarification that materiality should be directed towards the requirements of “primary users”, rather than just “users”, will significantly impact current practice for determining materiality. Primary users still encompass a broad spectrum of stakeholders who will have different or contradictory information needs.
An alternative approach would be to acknowledge that different primary users have different focuses within a set of public sector GPFR and that materiality for different sections of the GPFR may need to be different to take into account these different focuses.
Read the full response.
