The Concept of Materiality

question 46

Multiple Choice

The concept of materiality:

• A)Treats as material only those items that are greater than 2% or 3% of net income.
• B)Justifies ignoring the matching principle or the realization 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:

Hurricane Katrina

A devastating Category 5 hurricane that struck the Gulf Coast of the United States in August 2005, causing significant loss of life and property, particularly in New Orleans.

New Orleans

A major city in Louisiana, known for its vibrant music scene, distinct French and Spanish Creole architecture, and multicultural heritage, especially celebrated during Mardi Gras.

Mayor

The elected head of a city, town, or other municipality, responsible for governing and managing the administrative functions of the municipality.

National Guard

A reserve military force composed of state National Guard militia units, which operates under state and federal laws.