Lower Level of Planning Materiality

In addition to determining materiality at the financial statement level, determine whether there are any financial statement accounts, transaction classes or disclosures a lower planning materiality amount would be appropriate based on user perceptions of the particular items (for example, legal or regulatory matters, related party transactions, management compensation, key industry disclosures, or subsidiaries or divisions that are separately disclosed).
When making the determination, consider:
  • If accounting standards, laws, or regulations affect users’ expectations regarding the measurement or disclosure of certain items.
  • Key disclosures in relation to the industry and the environment in which the entity operates (for example, research and development costs for a pharmaceutical company).
  • If attention is focused on the financial performance of a particular aspect of the entity's business (for example, a newly acquired business).