The Concept of Materiality

question 25

Multiple Choice

The concept of materiality:

• A) Treats as material only those items that are greater than 2% or 3% of profit.
• B) Justifies ignoring the matching principle or the recognition principle in certain circumstances.
• C) Affects only items reported in the income statement.
• D) Results in financial statements that are less useful to decision makers because many details have been omitted.

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Definitions:

FMCG Company

A company specializing in Fast Moving Consumer Goods, which are products that sell quickly at relatively low cost, such as packaged food, beverages, toiletries, and over-the-counter drugs.

Diversification Strategy

A business growth strategy where a company expands its operations into new markets or product lines to reduce risks and take advantage of new opportunities.

Top Management Team

The group of high-ranking executives who are responsible for determining the strategic direction and policies of an organization.

Turnaround Strategy

Strategic actions taken by a company to reverse a period of decline or poor performance and achieve financial recovery.