Materiality definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Materiality can be defined as: Prescribes that accounting for items that significantly impact financial statement and any inferences from them adhere strictly to GAAP. Materiality help us to focus our time on item that are material to decision making and this implicitly implies that we will focus less time on things that are not material. In some ways the materiality principle is similar to a cost benefit analysis. Our goal in financial accounting is to generate financial statements useful to external users and we want to make sure we are treating any material factor as close to GAAP principles as possible.
