A general concept that draws a dividing line between issues/ events that are important and issues that are not for an entity. By definition, a material issue/ event is one that can have a major impact on the financial, operational, reputational, and legal aspects of an entity, including its broader internal and external stakeholders.

Materiality is also an accounting concept (or a convention) that centers on the importance/ significance of information (whether that relating to a monetary amount, transaction, event, or discrepancy (an accounting error). In other words, materiality reflects the impact of an omission, misstatement or obscuring of information in an entity’s financial statements on decisions made by the primary users of general purpose financial statements on the basis of those financial statements. In other words, materiality describes the relative size of a monetary amount against other amounts reported on an entity’s financials. Relatively large amounts are considered material, while relatively small amounts are immaterial.

Materiality (i.e., the extent to which information is material to an entity) depends on the nature or magnitude of information or at times both.