How do standard setters define materiality and why does it matter?

Material information is a core aspect of a firm's governance and reporting activities. If corporate information is material, then the firm has a responsibility to disclose it. Currently, firms must judge information as material largely based on a confusing set of standard setters’ definitions....

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Bibliographic Details
Published in:Business ethics (Oxford, England) England), 2021-07, Vol.30 (3), p.378-391
Main Author: Clark, Cynthia E.
Format: Article
Language:English
Subjects:
Companies
Governance
Welfare
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Summary:Material information is a core aspect of a firm's governance and reporting activities. If corporate information is material, then the firm has a responsibility to disclose it. Currently, firms must judge information as material largely based on a confusing set of standard setters’ definitions. I analyze the particular conditions laid out by each standard setter and explain the ethical implications that result from materiality judgments made by firms using these varied standards. Importantly, this analysis underscores that regulators, firms, and researchers alike must consider the impact of these implications on the fiduciary duty and promise‐keeping that firms make as well as the potential for unfairness and financial harm to others’ welfare that could result.
ISSN:2694-6416
2694-6424
DOI:10.1111/beer.12351