The Question Of Materiality In Sustainability Reporting

• In Event: Auditing and financial accounting: Skepticism and Forecasting
  In Dialogue Session: Auditing and Financial Accounting: Skepticism and Forecasting

Abstract

Materiality is a fundamental principle of financial reporting and is generally understood as the recognition that certain information is important to the fair presentation of an entity’s financial position and results of operations. Removed from this context though, what does materiality mean? Because of the recent emphasis on materiality in disclosure of activities related to sustainability, e.g., environmental, social, and economic impacts, consideration of the meaning of materiality seems warranted. However, just as the definition of “sustainability” may be different depending on the context, the term “materiality” is used in such a myriad of ways that it can mean almost anything and nothing at the same time. In addition, what is “material” is in the eye of the beholder. Our purpose is to re-conceptualize materiality in sustainability reporting by considering the nature, objectives and applicability of current reporting frameworks for both financial and non-financial information and the issues surrounding definitions of materiality with regard to sustainability reporting and practices. A history of the concept of materiality within the FASB Conceptual Framework for financial reporting is used as a springboard for exploring the ways in which materiality is conceptualized in sustainability reporting.

Authors

• Harriet Lynn Stallworth, Appalachian State University

• Tammy Kowalczyk, Appalachian State University