Materiality

Accounting Dictionary

Materiality

Determining whether the information is significant enough to make a difference.

Mary’s gross income last year was $1,000. She listed her new $500 computer as a depreciable long term asset. When you only make $1000, spending half your money for a computer is a pretty important decision. John works for a company that had gross income of $52,000,000. The full cost of a new $500 computer was deducted as office supplies. When you are talking about a company this size, a $500 computer isn’t significant enough to influence anyone’s decisions about the company. It’s not material, not significant enough to make a difference.

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