The Financial Reporting Council (FRC) Lab has produced a series of articles to help companies assess materiality in the context of corporate reporting. The articles explore how to apply materiality to create better, rather than more, reporting.
The Lab acknowledges that materiality is a subjective matter and that it will be up to individual boards to determine whether or not something is material for the purposes of complying with their companies' legal and regulatory obligations and reporting to their investors. The Lab nonetheless believes that there are common elements which can be applied when determining materiality, including:
- thinking about the needs of investors and their decision-making, on the basis that a better understanding of these will help frame whether a disclosure is material or not; and
- approaching materiality holistically, rather in silos.
Related to understanding the common issues which drive investor decision-making, the FRC Lab intends to publish a separate report on business model-focused reporting later this year.
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