The IPSASB issued ED 97, IPSAS Practice Statement Making Materiality Judgments to develop non-mandatory guidance on making materiality judgments when preparing financial statements in accordance with IPSAS® Accounting Standards. The proposed guidance is aligned with IFRS® Practice Statement 2 Making Materiality Judgements but adapted for the public sector’s circumstances.

Overall, we support the objective of the ED. Materiality judgements are integral to the preparation of financial statements and the consistent application of the accounting requirements in both the private and public sectors. We support the development of additional guidance and examples for the public sector to improve the application, especially for jurisdictions at an earlier stage of IPSAS adoption.

We are aware of calls for materiality guidance with a focus on translating conceptual principles into holistic practical application, but there are practical limits to the variety of circumstances guidance can effectively address. Nevertheless, some examples that demonstrate how preparers bring together multiple qualitative and quantitative considerations and apply judgement holistically when making materiality assessments would be helpful.

Form of the guidance

This ED introduces a new form of guidance into the IPSASB literature: a Practice Statement. We are of the view that there is a need to distinguish it from the various other forms of guidance supporting its standards, such as Implementation Guidance, Illustrative Examples and Basis for Conclusions and non-authoritative Recommended Practice Guides (RPGs). This need for clarity of purpose further underscores the importance of the IPSASB’s planned research into the architecture of its existing suite of literature to determine where guidance is best situated.

Primary users and the scope of reporting

We also encourage the IPSASB to consider the difference in the scope of reporting between the definitions of materiality contained in the IPSASB Conceptual Framework and that in IPSAS 1 Presentation of Financial Statements. The Conceptual Framework refers to decisions made by primary users based on general purpose financial reports (GPFR), while IPSAS 1 refers to decisions made by primary users based on general purpose financial statements. Given that public sector accountability and decision-making are often informed by information contained in GPFR, such as service performance information and other accountability documents, this distinction may warrant further consideration.