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Significance


The state of being significant in impact. Significant implies anything (e.g., an amount, occurrence, transaction, etc.) that has the potential to influence an entity’s judgement (i.e., its management’s judgment) or decision as to the way it tackles a specific aspect of its accounting for a certain event, transaction, etc. An example is a management’s judgment as to whether substantially all the significant risks and rewards incidental to ownership of a financial asset are transferred to other entities.

In another context, specific measures of value may have financial accounting significance, but little legal or economic significance, and vice versa. For example, the par value of a share of common stock has typically limited legal or economic significance. However, this value has financial accounting significance due to the need to recognize common stock transactions in the journal entries based on par value. In the same sense, par value is insignificant from an economic perspective as it doesn’t correspond to a common stock’s market value.



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Accounting is the language of business, everywhere, worldwide. It is the means by which virtually every business communicates information about its operations, irrespective of size, scale, objectives, ...
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