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Defining a Material Issue

Scott Taub | November 24, 2015

You see the sentence all the time: “The provisions of this Codification need not be applied to immaterial items.”

That sentence is in the Accounting Standards Codification (ASC) at ASC 105-10-05-6. Prior to the ASC’s creation in 2009, every standard issued by the Financial Accounting Standards Board ended with boxed reminder, “The provisions of this statement need not be applied to immaterial items.” So that little sentence, in slightly different from, has been around for more than 40 years.

They are 12 simple words whose meaning, in general terms, is pretty well understood and universally accepted. The sentence tells us we don’t need to include unimportant...

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