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Central Bank Materiality Disclosure Policy

A. Based on IMF Working Paper

In order to drive transparency in central bank financial statement disclosures.
International Monetary Fund (IMF) has settled the requirement for applying
International Accounting Standard 1 Presentation of Financial Statements (IAS 1)
and International Accounting Standard 30 Disclosures in the Financial
Statements of Banks and Similar Financial Institutions (IAS 30) to central bank
financial reporting.
Materiality disclosure policy stand in the IAS 1 outlines fundamental concepts
for account preparation:
Materiality: Each material item should be presented in the financial
statements and immaterial items should be aggregated . It is important to
recognize that materiality encompasses both materialities by amount and
materiality by nature. For example, entering a low-value transaction may
have extremely important risk consequences for the entity that are
important to disclose to the users of the financial statements. In this
context, information is material if nondisclosure is likely to influence the
economic decisions of the financial statement users
B. Bank Indonesia Financial Accounting Policies (KAKBI)
Bank Indonesia disclosed the materiality and aggregation on their Bank
Indonesia Financial Accounting Policies (KAKBI) PKAK 02: Presentation of
Financial Statements:
Bank Indonesia shall present separately each material class of similar
items and sub items. This is based on Bank Indonesias duties and/or
differing characteristics , unless they are immaterial.
The financial statements are the result of processing transactions and
other events that are classified based on the duties and/or nature of Bank
Indonesia. The final stage of the process of aggregation and classification
is presentation in the financial statements. If a particular item or sub-item
classification is not material, it may be aggregated with other similar items
or sub items in the financial statements or in the notes to financial
statements. An item or sub-item may not be sufficiently material to be
presented separately in the financial statements but may be sufficiently
material to be presented separately in the notes to financial statements.
Bank Indonesia need not provide a specific disclosure required by a PKAK if
the Information is not material.

C. European Banking Authority Guidelines

To ensure effective and consistent prudential regulation and supervision
across the European banking sector, European Banking Authority has published
the Guidelines on materiality, proprietary and confidentiality and on disclosure
frequency under Articles 432(1), 432(2) and 433 of Regulation (EU) No 575/2013.
Materiality content has disclosed in title III Considerations for assessing
materiality of disclosures:
In assessing materiality of an item of information, institutions should as a
minimum consider the following:
a) materiality should be assessed on a regular basis and at least once
a year
b) materiality should be assessed for both qualitative and quantitative
disclosure requirements
c) materiality should be assessed at the level of each individual
disclosure requirement and, where relevant, on an aggregate basis.
In particular institutions should assess whether the cumulative
effect of omitting specific disclosure requirements that are regarded
individually as immaterial would result in the omission of
information that could influence the economic decisions of users
d) materiality should be assessed taking into consideration the
circumstances and the broader context at the time of disclosure for
example the influence of the economic and political environment
e) materiality should be a user-centric concept and should be
assessed based on the assumed users' needs and the assumed
relevance of information for users: a disclosure requirement may
not be material for the institution but may be material for users.
Therefore, the extent of the disclosed information should be
tailored to users needs and should consider the incidence of
disclosure on their understanding of the institution and of its risk
profile. Information related to items involving a high degree of
subjectivity on the part of institutions for determining their amount
are likely to be material for users.
f) materiality should be assessed taking into account the specific
nature and purpose of the requirements assessed. The criteria
should not be applied in the same way for all disclosure
requirements. In particular special procedures/indicators different
from those used to determine materiality for quantitative
disclosures may be needed for qualitative disclosures
g) materiality should be an institution-specific concept. It should
depend on the specific characteristics, activities, risks and risk
profile of an institution and should not be automatically assessed
by reference to the size/scale of the institution, to its relevance in
the domestic market or to its market share

h) materiality does not depend only on size. Materiality is linked to the

quantitative importance in terms of amount and/or qualitative
importance in terms of the nature of a given piece of information
such as exposures or risks, which can be material by nature or size.
An assessment of materiality based only on quantitative
approaches or materiality thresholds should not be generally
deemed as appropriate for disclosures
i) materiality should be a dynamic concept: it depends on the context
of disclosures and may therefore be applied differently to different
disclosures over time depending on the evolution of risks. In
particular, institutions should consider the risks/business activities
to which they are or might become exposed. Ad hoc reassessments of materiality as risks evolve or circumstances change
may result in variety in the types and extent of disclosures over
Assessing materiality should be a matter of judgment made by any
relevant function adding value to the assessment of materiality of the
disclosures in question, and informed by relevant criteria and indicators.
When implementing paragraph 12 to assess the materiality of an item of
information, institutions should pay particular attention to the following
a) their business model, based on individual indicators, and long-term
b) the size, expressed as a share of regulatory, financial or profitability
metrics or aggregates or as a nominal amount, of the item of
information or element (risk, exposure) to which the information is
related and for which materiality is assessed
c) the influence of the element to which an item of information is
related on the development of total risk exposures (expressed in
particular in terms of amounts of exposures or amount of RWA) or
the overall risk profile of the institution
d) the relevance of the item of information in terms of understanding
the current risks and solvency of the entity and their trend,
considering that the omission should not mask a trend in the
evolution of risks from a previous period
e) the amplitude of changes to the element to which an item of
information is related in comparison to the previous year
f) the relation of the information to recent developments in risks and
disclosure needs, as well as to market practices regarding
Based on the guidelines above, these are the following competent authorities
comply or intend to comply with:
Member State

Competent Authority


National Bank of Belgium

Complies or Intends to

Czech Republic

United Kingdom


National Bank
Czech National Bank
Danish Financial
Supervisory Authority
Federal Financial
Supervisory Authority
Financial Supervision
Central Bank of Ireland
Bank of Greece)
Croatian National Bank
Bank of Spain
Prudential Supervisory &
Resolution Authority
Bank of Italy
Central Bank of Cyprus
Financial and Capital
Market Commission
Bank of Lithuania
Commission for the
Supervision of Financial
Central Bank of Hungary
Malta Financial Services
National Bank of
Financial Market
Polish Financial
Supervision Authority
Bank of Portugal
National Bank of Romania
Bank of Slovenia
National Bank of Slovakia
Finnish Financial
Supervisory Authority
Swedish Financial
Supervisory Authority
Prudential Regulation
Authority (Bank of
Financial Conduct
Authority (FCA)
Financial Services
Commission (Gibraltar)


Icelandic Financial
Supervisory Authority -


No response

No response

EU Institutions - Agencies

Financial Market
Norwegian Financial
Supervisory Authority



D. Bank of Thailand
Based on Draft Consultative Paper Basel II Supervisory Guidelines on Capital
Fund, Bank of Thailand has disclosed the materiality regulation for Financial
Report and Thailands Financial Institutions. Under pilar III, Materiality of
BOT requires that FIs determine which information to be disclosed based on
the materiality concept according to Pillar 3. That is, Kmaterial informationL
means information whose omission or misstatement could influence the
assessment or decision of an information user, which is in line with the
materiality concept of the accounting standards. Therefore, FIs should
carefully determine items to be considered as material and be disclosed to
the public. FIs must disclose the principle used to determine materiality of
information to the information users as well as maintain consistency in
determining materiality of information to be disclosed to the public.
E. Central Bank of Ireland
Central bank of Ireland concerned about the materiality of Financial Report
contained on Annual Complience Statement, in their presentation to CUMA
conference, their pointed out:

Board determines materiality for non-compliance

Materiality depends on facts of each case
Factors to consider include:
o Frequency and duration of non-compliance
o Extent to which non-compliance departs from required
o Impact of non-compliance
o Indicate serious or systemic weakness of systems and
o Number of non-material issues that are collectively material
Materiality Statement - set out criteria to assess materiality

F. IFRS Exposure Draft

IASB has released the IFRS practice statements: -Application of Materiality to

Financial Statements. The concept of materiality is pervasive to the preparation
of financial statements. Requirements in IFRS must be applied if their effect is
material to the complete set of financial statements. Similarly a requirement in
IFRS need not be applied if the effect of not applying it is not material.
When assessing whether information is material to the financial
statements, management applies judgement to decide whether
information could reasonably be expected to influence decisions that the
users make on the basis of those financial statements. When applying
such judgement, management should consider both the entitys specific
circumstances and how the information will be used by users of the
financial statements. An entitys circumstances change over time and so
materiality is reassessed in each reporting period in the light of the
entitys circumstances during that period. This assessment should include
comparing the current year information with comparative information for
prior periods to assess changes in the entitys activities or circumstances
during the perioD
Qualitative and quantitative assessment:
The assessment of whether information is material depends on its size and
nature, judged in the particular circumstances of the entity.10
Consequently, applying materiality involves assessing qualitative and
quantitative factors.
Quantitative information, such as an items value or carrying amount, is
not the only factor that is considered when assessing whether an item is
material. The assessment of whether an item is material also depends on
qualitative considerations, including entity-specific factors. Consequently,
it would not be appropriate for an entity applying IFRS to rely on purely
numerical guidelines. Similarly, it is not appropriate for IFRS to specify a
uniform quantitative threshold for materiality or to predetermine what is
material in a particular situation
However, while quantitative thresholds are not in themselves
determinative, they can be a helpful tool in applying the concept of
materiality. A quantitative threshold may provide the basis for a
preliminary assessment that an amount is likely to be material or
immaterial; for example if it is below a specified percentage of profit or net
assets. However, a materiality assessment also requires consideration of
the nature of the item and the entitys circumstances.
Immaterial information:
Providing immaterial information in the financial statements may obscure
material information and consequently mean that the financial statements
are less understandable. For example, if an entity discloses detailed

information about transactions that do not have a material effect on the

entitys reported financial position or financial performance this may make
the material information harder to find. Disclosing immaterial information
increases the length of financial statements, makes them less
understandable and requires the primary users to spend more resources in
searching for material information