SEC Chief Accountant Reviews "Materiality" in Financial Disclosure

SEC Acting Chief Accountant Paul Munter reviewed the concept of materiality in reporting and disclosure, emphasizing the importance of using an objective assessment when identifying material errors in financial statements. He stated that an objective assessment considers whether the error would be important to the reasonable investor.

In his public statement, Mr. Munter emphasized the following:

“Since the concept of materiality is focused on the total mix of information from the perspective of a reasonable investor, those who assess the materiality of errors, including registrants, auditors, audit committees, and others, should do so through the lens of the reasonable investor.”

Mr. Munter stated that the materiality analysis should take into consideration all relevant facts and circumstances, including both quantitative and qualitative factors. He added that management, boards of directors, and audit committees are all important in the financial reporting process and should be keeping investors needs in mind throughout.