Which of the following phrases or terms regarding materiality is used by the Supreme Court of the United States and is not found in FASB Concepts Statement No. 2? a. “in light of surrounding circumstances” b. “significantly altered the total mix of information available” c. “amount of a misstatement or omission” d. “probable that the judgement of a reasonable person”
Which of the following phrases or terms regarding materiality is used by the Supreme Court of the United States and is not found in FASB Concepts Statement No. 2?
Answer : b. “significantly altered the total mix of information available”
Explaination to the above answer
The Supreme Court has held that a fact is material if there is –a substantial likelihood that the . . . fact would have been viewed by the reasonable investor as having significantly altered the “total mix” of information made available.
The FASB has long emphasized that materiality cannot be reduced to a numerical formula. In its Concepts Statement No. 2, the FASB noted that some had urged it to promulgate quantitative materiality guides for use in a variety of situations. The FASB rejected such an approach
