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Published on 8 April 2025

Amendments to Ind AS 1 and Ind AS 8: Clarifying the Definition of Material

Exposure Draft on Amendments to Ind AS 1 and Ind AS 8: Definition of Material

This document presents the Exposure Draft for amendments to Ind AS 1, Presentation of Financial Statements, and Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, issued by the Accounting Standards Board of the Institute of Chartered Accountants of India (ICAI). These amendments aim to refine the definition of ‘material’ in a manner consistent with other Indian Accounting Standards (Ind AS). The intent is to enhance clarity without altering the fundamental concept of materiality.

Amendments to Ind AS 1: Presentation of Financial Statements

Redefining Material

The definition of material in Ind AS 1 has been amended to read as follows:

  • Materiality Concept: Omissions or misstatements are material if they could influence the economic decisions of users relying on the financial statements. Materiality is assessed based on the size and nature of the omission or misstatement, judged within the context of surrounding circumstances.

  • Contextual Understanding: Material information is that which, if omitted, misstated, or obscured, could reasonably be expected to influence economic decisions. This assessment considers the users’ reasonable knowledge of business and accounting practices, as highlighted in the Framework for Preparation and Presentation of Financial Statements.

  • Obscured Information: Information is deemed obscured if presented in a way that has an effect similar to its omission or misstatement. Examples of obfuscation include:

    • Use of vague language in disclosures.
    • Scattering important information throughout the statements.
    • Inappropriate aggregation or disaggregation of items.
    • Compromised understandability due to immaterial information overshadowing material data.

Effective Date

The amendments introduced to the definition of material in paragraph 7 of Ind AS 1 will come into effect for annual periods beginning on or after April 1, 2020.

Amendments to Ind AS 8: Accounting Policies, Changes in Accounting Estimates, and Errors

Updated Definitions

The term ‘material’ has been aligned with the updated definition from Ind AS 1:

  • Material Definition: Omitted or misstatements of items are material if they could influence the economic decisions that users base on the financial statements.

Effective Date

Changes in paragraph 5 and the deletion of paragraph 6 of Ind AS 8 will also take effect from April 1, 2020.

Amendments in Other Ind AS

Note: Alignments are required for other Indian Accounting Standards related to the amendments in Ind AS 1 and Ind AS 8. Currently, no changes are proposed to the Framework for the Preparation and Presentation of Financial Statements.

Amendments to Ind AS 10: Events After the Reporting Period

Non-adjusting Events

Paragraph 21 is amended to clarify that if non-adjusting events after the reporting period are material, their non-disclosure could impact economic decisions.

Effective Date

The amendment in paragraph 21 will apply when the definition of material is amended according to the updates in Ind AS 1 and Ind AS 8.

Amendments to Ind AS 34: Interim Financial Reporting

Clarifying Materiality

Paragraph 24 now specifies that Ind AS 1 and Ind AS 8 define material items based on their potential to influence economic decisions.

Effective Date

The updates in paragraph 24 will also apply concurrently with the amendments to the definition of material in Ind AS 1 and Ind AS 8.

Amendments to Ind AS 37: Provisions, Contingent Liabilities, and Contingent Assets

Restructuring Guidelines

Amendments clarify that a restructuring decision does not create a constructive obligation unless action has been taken before the reporting period concludes.

Effective Date

The changes related to the definition of material in paragraph 75 will align with the amendments to the definition in Ind AS 1 and Ind AS 8.

These refinements aim to strengthen the consistency and clarity of the definition of material across all relevant Indian Accounting Standards while enhancing the guidance provided to users of financial statements.

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