Relation of Materiality Concept with other Accounting Principles
1. Relevance: Materiality and relevancy are the same principles because applicability to investors’ decision-making is highly noted in each of them. Materiality fosters the inclusion of only major aspects of financial statements, which enhances their relevance consequently.
2. Reliability: Materiality has a great deal of bearing on the trustworthiness of financial information, through the implementation of accounting procedures that will rigorously report material items. This becomes possible when the firm states only the material information that matches the general principle of reliability for users to trust the reliability that the financial statements have no material misstatements.
3. Consistency: Materiality enhances consistency in financial reporting since this concept is applied through a common filter over every reporting period determining what facts should be pronounced. Consistency serves for the presentation of financial accounts that are identical after all periods, allowing the user to spot the trends accordingly and appraise the results.
4. Prudence/Conservatism: Materiality within the principle of conservatism plays the role of a needle providing us with the ability to assess the materiality of the smallest items in the business. The risk of material misstatements is usually considered due to considerable uncertainties under the principle of prudence, which is consonant with the concept of materiality, which implies that mainly big information is important to account for.
5. Completeness: Materiality forms the principle of completeness in financial statements as it allows accountants to include all material information in reports. The completeness ensures all required information is disclosed, on the other hand, materiality focuses on the representation of the meaningful issues, which are of great importance without ornamenting language with fine details.