The main issue found on materiality in
financial reporting is in the application, according to the
majority of respondents to a European Securities and Markets
Authority (ESMA) consultation.

The consultation, which was launched in
November 2011, found that while the majority of all respondents
believe the concept of materiality is generally well understood,
they see diversity in application thus more guidance is needed.

However, the majority think the guidance
should come from the International Accounting Standards Board.

The main reason for diversity in application
was attributed to management judgement, separate perspectives of
different stakeholder groups, and general difficulties in applying
the concept to certain issues.

Many respondents also said the application of
materiality concept to disclosures could help address the problem
of ‘too many disclosures obscuring the reporting about an entity’s
financial position and performance’.

There were also calls for the principles to be
applied in assessing materiality in interim and annual financial
reports to be the same.

ESMA is due to hold a public roundtable in
Paris later this year to discuss the various issues raised in
response to the consultation paper.