Materiality :

In deciding how to recognise, measure, classify, or disclose an item for interim financial reporting purposes, materiality should be assessed in relation to the interim period financial data. In making assessments of materiality, it should be recognised that interim measurements may rely on estimates to a greater extent than measurements of annual financial data.

The Preface to the Statements of Accounting Standards states that “The Accounting Standards are intended to apply only to items which are material”. The Framework for the Preparation and Presentation of Financial Statements, issued by the Institute of Chartered Accountants of India, states that “information is material if its misstatement (i.e., omission or erroneous statement) could influence the economic decisions of users taken on the basis of the financial information”.

Judgement is always required in assessing materiality for financial reporting purposes. For reasons of understandability  of the interim figures, materiality for making recognition and disclosure decision is assessed in relation to the interim period financial data. Thus, for example, unusual or extraordinary items, changes in accounting policies or estimates, and prior period items are recognised and disclosed based on materiality in relation to interim period data. The overriding objective is to ensure that an interim financial report includes all information that is relevant to understanding an enterprise’s financial position and performance during the interim period.