Developments of Note
SEC Issues Staff Accounting Bulletin Concerning Materiality
The SEC published a Staff Accounting Bulletin ("SAB") to highlight that exclusive reliance on certain quantitative benchmarks to assess "materiality" when developing financial statements and performing audits of those statements is inappropriate. The SEC emphasized that misstatements are not automatically immaterial simply because they fall beneath a numerical threshold. The SAB declares certain companies have developed quantitative thresholds as rules of thumb to assist them in the evaluation of financial statements, with a common rule of thumb suggesting that a misstatement or omission of an item that falls under a five (5%) percent threshold generally is not material. Although such a threshold may provide a presumption that a deviation is unlikely to be material, it cannot be used as a substitute for a full analysis of all relevant considerations (i.e., a matter is "material" if there is a
