• The “Four-step Process for Making Materiality Judgements” – The Practice

Statement includes a description of the process which illustrates one possible way
to make materiality judgements and incorporate the materiality requirements a
company must apply to comply with IFRS Standards
o Practice Statement
 Provides companies with guidance on making materiality judgements when
preparing general purpose financial statements in accordance with IFRS Standards
 Helps other parties involved in financial reporting to understand how an
entity makes materiality judgements in preparing financial statements
 Promote behavioral change in the way entities prepare financial statements,
encouraging a greater application of judgement

THE 4 STEPS
• Step 1: Understand the context and identify potential material topics
o It considers the IFRS requirements applicable to its transactions, other
events and conditions and its primary users’ common information needs.
• Step 2: The entity then assesses whether the information identified in Step 1
is material
o The entity needs to consider quantitative (size) and qualitative (nature)
factors
 The presence of a qualitative factor lowers the thresholds for the
quantitative assessment
• Step 3: Organize the information within the draft financial statements
o Emphasize material matters
o Tailor information to the entity’s own circumstances
o Describe the entity’s transactions, other events and conditions as simply and
directly as possible
o Highlight relationships between different pieces of information
o Provide information in a format that is appropriate for its type
o Provide information in a way that maximizes comparability – to the extent
possible
o Avoid or minimize duplication of information
o Ensure material information is not obscured by immaterial information
• Step 4: Review the draft financial statements
o Consider whether the information is material both individually and in
combination with other information
o May lead to adding or removing information, as well as aggregating,
disaggregating, and reorganizing information, or going back to Step 2