Materiality and Relevance in Financial Reporting. Interpretation Problems and Solutions Adopted Internationally.

Abstract

The concepts of relevance and materiality have, for decades now, been the subject of in-depth study by both doctrine and the bodies whose task it is to issue accounting standards. The aforementioned terms have different meanings in the various countries, although, in general, the difference in interpretation is only a nuance of concept that is often difficult even to identify. When moving from international standards to national standards issued by organisations within individual countries, translation issues can be identified that lead to the use of terms other than relevance and materiality but which, when reading the documents, essentially refer to those standards. As will be seen in the following pages, in Italy these concepts, although identified by different terms than relevance and materiality, have also been adopted by the criminal law concerning evasion and accounting. These concepts therefore transcend the issue of financial reporting to affect both auditing principles and the position of the judiciary, which, applying current legislation, appeals to the tenuity of the fact to reduce or cancel penalties connected with tax offences such as evasion of value added tax.