Dec 14, 2015
From the Financial Reporting Network
KPMG LLP recently commented on the proposed amendments to FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting – Chapter 3, Qualitative Characteristics of Useful Financial Information, and proposed FASB ASU, Assessing Whether Disclosures Are Material. The proposed amendments to Concepts Statement 8 would replace the current definition of materiality in Concepts Statement 8 with a broad observation of the U.S. Supreme Court definition of materiality (i.e., materiality would be a legal concept). The proposed ASU would provide more flexibility and discretion for entities to provide material information in the notes to the financial statements. Disclosures would not be required for immaterial information and nondisclosure due to immateriality would not be considered an accounting error.
KPMG supports the Board’s efforts to improve the effectiveness of disclosures in the notes to the financial statements. However, the firm believes the Board needs to reconsider defining the concept of materiality in Concepts Statement 8 as a legal concept, which KPMG believes would result in less consistency in financial reporting than the FASB would achieve by making it an accounting definition. Furthermore, a legal definition may increase costs and complexity. KPMG encouraged the FASB to consider the issues of materiality and accounting errors more comprehensively and with a broader group of stakeholders, including the SEC, PCAOB, and ASB.