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Part IV provides readers with the extant requirements for the application of materiality to recognition, measurement, presentation, and disclosure in the financial statements. This part also includes a detailed critical review of the recent Practice Statement on materiality, the FASB’s proposed ASU on the notes and the amendments to the Conceptual Framework proposed by the IASB and the FASB.

The part expands to issues that are typical of Management Commentary, including the SEC guidance on materiality in Management Discussion and Analysis.

It informs about the complexities and subtle differences between financial statements and bookkeeping and the different standards of reasonableness versus materiality.

A section moves from materiality to material misstatements and covers the application of materiality in auditing.

Another section goes in depth on internal control over financial reporting, showing the linkages between materiality and risk appetite and risk tolerance and the related application guidance.

This paper aims to evaluate the outcome effectiveness of the global reporting initiatives (GRI) transitions by understanding how companies have responded to the changes from G3.1 to G4 and finally to the GRI Standards.

A quality disclosure score is developed that incorporates assessments of both the quality of disclosures and the materiality of Australian companies. To analyse materiality, survey data were collected from 187 companies. Disclosure scores are based on a content analysis of the sustainability reports of 12 mining and metals companies and 12 financial services companies that used the GRI Standards from 2011 to 2019 (a total of 213 reports).

The study found that the GRI transitions have not led to companies improving the quality of their disclosures on areas considered important for them to achieve their social and environmental goals. Instead, the companies tended to use a greenwashing strategy, where the quality of disclosure of material issues declined or fluctuated over time.

From a practical perspective, the disclosure score developed in this paper enables managers of companies to recognize a threshold of completeness and to summarize the areas that are not materially relevant to their business.

The results are potentially helpful for investors, shareholders and other stakeholders, enabling them to better understand sustainability reports.

This study contributes to the body of research in sustainability reporting by providing evidence on the outcome effectiveness of the latest updates in the GRI framework.

This paper aims to evaluate the extent of materiality assessment disclosures in sustainability reports and their determinants. The study examines the disclosure practices of listed companies based in the member states of the Cooperation Council for the Arab States of the Gulf, colloquially referred to as the Gulf Cooperation Council (GCC).

First, the materiality assessment disclosures were scored through a content analysis of sustainability reports published by listed GCC companies during a five-year period from 2013 to 2017. Second, a fixed effect ordered logic regression was used to examine the determinants of materiality assessment disclosures.

While sustainability reporting rates improved across the sample period, a significant majority of listed GCC companies do not engage in sustainability reporting. The use of internationally recognised standards has also declined. While reporters provide more information on their materiality assessment, the number of sustainability reports that offer information on how the reporter identifies material issues has declined. These trends potentially indicate the existence of managerial capture. Materiality assessment disclosure scores are positively influenced by higher financial performance (Return on Assets), lower leverage and better corporate governance. However, company size and market-to-book ratio do not influence materiality assessment disclosures.

The findings may prove useful to managers responsible for preparing sustainability reports who can benefit from the examples of materiality assessment disclosures. An evaluation of the materiality assessment should be included in the scope of assurance engagements and practitioners can use the examples of best practice when evaluating sustainability reports. Stock exchanges may consider developing improved corporate governance guidelines as these will lead to materiality assessment disclosures.

The findings may assist in improving sustainability reporting quality, through better materiality assessment disclosures. This will allow corporate stakeholders to evaluate the reporting entities underlying processes, which leads to transparency and corporate accountability. Improved corporate sustainability reporting supports the GCC commitment to implement the United Nations Sustainable Development Goals and transition to sustainable development.

This study addresses the call for greater research examining materiality within a sustainability reporting context. This is the first paper to examine sustainability reporting quality in the GCC region, focussing particularly on materiality assessment disclosures.

This paper aims to assess the disclosure of the materiality process in the preparation of sustainability reports of state-owned enterprises (SOEs). This paper also explores the effects of regulation mandating that SOEs prepare sustainability reports. In the specific case of port authorities, the study analyses the influence of a sector guideline that determines what should be included and the structure of the report. Another aim of this paper is to delve into SOE's motivations for disclosing information on materiality assessments, using the assumptions of the different theories to explain their reporting practices.

Using a sample of SOEs sustainability reports, a content analysis is undertaken. The methodology involves the analysis of the information disclosed by SOEs in Spain and the development of a materiality disclosure index. This index enables sampled entities to be classified on a scale of 0–5, based on the extent of their disclosures of the materiality determination process. This study also identifies several variables that explain differences in these disclosures.

A low rate of information disclosed about the materiality process can be attributed to the desire of SOEs to create symbolic legitimacy. In a context where the disclosure of sustainability information is mandatory, only few organisations apply the principle of materiality to define the content of their sustainability reports. These results highlight that institutional isomorphism has only had a limited effect on the materiality process.

Limitations associated with the sample size and composition of the sample by sector apply.

This research shows that generally accepted reporting guidelines constitute a reference framework for sustainability reporting but that the principles underpinning these frameworks are not always implemented.

This study extends the literature on the implementation of the principle of materiality and uses disclosure theories to explain the actual reporting by SOEs of their materiality process.

This paper aims to assess the disclosure on materiality analysis in sustainability and integrated reports through the lenses of legitimacy and stakeholder theory. The following three research questions are addressed: to what extent do companies report on their materiality analysis, what are the methods used for the analysis of the stakeholders and their topics/aspects and is there a higher disclosure of information of materiality assessment because of G4.

The paper uses an archival research approach and deploys content analysis. Thus, a binary disclosure index was developed that indicates whether materiality related information are mentioned and explained in detail. The sample contains 132 reports from 33 companies of the German 110 HDAX stock market index between 2014 and 2017.

The paper reveals that materiality analysis is a growing phenomenon. Nevertheless, companies disclose only a small amount of related information and fail to explain the methods for the stakeholder and topics/aspects identification. Thus, the underlying processes to define the report content remains unclear. Through the lenses of legitimacy theory, the study indicates that materiality analysis can strategically be misused to define report content without considering the interests of legitimized stakeholder groups and thus, does not improve the reports to those groups.

Managers are urged to regard the importance of reporting about ongoing materiality assessments, as otherwise, concerns about the overall reliability of the information presented may arise.

Poor reporting about materiality assessments might lead to potential conflicts with stakeholders that do see their important topics not sufficiently reflected in the sustainability or integrated report.

This study contributes to the literature regarding materiality in sustainability and integrated reporting and uses the assumptions of disclosure theories to evaluate the disclosure of a specific disclosure item.

Integrated reporting enhances the meaningfulness of non-financial information, but whether this enhancement is progressive or regressive from a sustainability perspective is unknown. This study aims to examine the influence of the Integrated Reporting (<IR>) Framework on the disclosure of financial- and impact-material sustainability-related information in integrated reports.

Using a disclosure index constructed from the Global Reporting Initiative’s G4 Guidelines and UN Sustainable Development Goals, the authors content analysed integrated reports of 40 companies from the International Integrated Reporting Council’s Pilot Programme Business Network published between 2015 and 2017. The content analysis distinguished between financial- and impact-material sustainability-related information.

The extent of sustainability-related disclosures in integrated reports remained more or less constant over the study period. Impact-material disclosures were more prominent than financial material ones. Impact-material disclosures mainly related to environmental aspects, while labour practices-related disclosures were predominantly financially material. The balance between financially- and impact-material sustainability-related disclosures varied based on factors such as industry environmental sensitivity and country-specific characteristics, such as the country’s legal system and development status.

The paper presents a unique disclosure index to distinguish between financially- and impact-material sustainability-related disclosures. Researchers can use this disclosure index to critically examine the nature of sustainability-related disclosure in corporate reports.

This study offers an in-depth understanding of the influence of non-financial reporting frameworks, such as the <IR> Framework that uses a financial materiality perspective, on sustainability reporting. The findings reveal that the practical implementation of the <IR> Framework resulted in sustainability reporting outcomes that deviated from theoretical expectations. Exploring the materiality concept that underscores sustainability-related disclosures by companies using the <IR> Framework is useful for predicting the effects of adopting the Sustainability Disclosure Standards issued by the International Sustainability Standards Board, which also emphasises financial materiality.

Despite an emphasis on financial materiality in the <IR> Framework, companies continue to offer substantial impact-material information, implying the potential for companies to balance both financial and broader societal concerns in their reporting.

While prior research has delved into the practices of regulated integrated reporting, especially in the unique context of South Africa, this study focuses on voluntary adoption, attributing observed practices to intrinsic company motivations. To the best of the authors’ knowledge, it is the first study to explicitly explore the nature of materiality in sustainability-related disclosure. The research also introduces a nuanced understanding of contextual factors influencing sustainability reporting.

Part V analyzes the details of how to assess materiality. It first tackles qualitative versus quantitative criteria and the role of professional judgment. It then analyzes the selection of quantitative threshold, to expand to the choice of benchmarks. It contrasts the whole financial statements with subaggregates, line items, and components.

Specific sections contrast IASB, FASB, SEC, and other guidance on materiality applied to comparative information, interim reporting, and segment reporting.

The section on estimates mingles complex guidance coming from accounting, auditing, and internal control over financial reporting to explain how the management can improve its assessment of materiality concerning estimates.

After explaining the techniques to move from individual to cumulative misstatements, the part tackles verification ex post, and finally summarizes the intricacies of whether immaterial misstatements are permissible and their consequences.

Part III reviews the uses and effects of materiality as an accounting, legal, audit, and managerial concept. After mentioning several uses of materiality as a legal concept and explaining the FASB’s proposed direction to avoid an accounting definition, it goes in depth to the differences in the respective definitions, applications, practical interactions, and different nature of the legal and accounting views. It then draws on the differences between audit and accounting uses of materiality.

It counterbalances the interests and positions of the various stakeholders involved, such as investors, preparers, standard-setters, auditors, regulators, financial analysts, and other users of the financial statements. It shows that those who regulate, use, decide, and assess materiality are different subjects.

Finally, the part capitalizes on the author’s vast experience in industry to theorize a plethora of alternative and complementary models of materiality with their pros and cons.

As the comparability concept has recently garnered increased attention of policymakers and standard setters in the sustainability reporting (SR) arena, this paper aims to provide a reflexive viewpoint of this concept in this context.

To inform the authors’ viewpoint and disentangle the concept of comparability into different facets, the authors review policymakers’ and standard setters’ (including the Global reporting initiative) comparability principles, as well as relevant studies in the field. To provide insights into the different ways in which the comparability facets can be approached, the authors use multi-perspective reflexive practices and focus on the multiple purposes that reporting can serve. To empirically animate the authors’ reflection on the facets, the authors analyse the sustainability disclosures of two Italian banks over three years.

This study reveals that three facets form valuable starting points for extending the understanding of the meanings the comparability concept can carry in the SR arena. These facets are materiality and comparability, benchmarking/monitoring and comparability and operationalisation and comparability.

This study is intended to elicit policymakers’ and standard setters’ thoughts on the role of comparability and its complexities in SR.

By taking a critical and reflexive approach, the authors encourage policymakers and standard setters to reconsider the comparability principle, so it effectively embeds the accountability purpose of SR.

In this paper, the authors propose three facets for disentangling the concept of comparability.

The last part of the book wraps up the whole content in showing how an experienced professional can handle discussions with management to uncover inappropriate schemes, manipulation tactics, if not frauds.

It first reports the predominant idea that today’s issue about materiality is simply behavioral or concerns implementation issues. It then moves to the observation of illegitimate use of materiality in the real world to manipulate financial results.

It then goes through an illustration of SEC staff’s comments on materiality in the review of Form 20-F of foreign private issuers reporting under IFRS.

Finally, the part spells out typical materiality abuses by management, which can be found in practice. Each occurrence of this long list is linked to the respective part of the book that treats the theoretical bases of why a certain reasoning is a fallacy, and the specific pronouncements that such a behavior would contravene.