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In 1954, the American Institute of Certified Public Accountants (AICPA) Committee on Accounting Procedure released an auditing book, which listed under the heading “Material” certain items of which it cautioned “material errors” could occur (AICPA, 1954, p. 1). From this date until the present, the accounting profession has struggled in its endeavors to find both a suitable definition and associated guidance to determine the materiality of information provided to financial statement users. Accordingly, in September 2015, the Financial Accounting Standards Board (FASB) issued two exposure drafts that address the concept and interpretation (our emphasis) of materiality. The releases are Proposed Amendments to Statement of Financial Accounting Concepts, Conceptual Framework for Financial Reporting; Chapter 3: Qualitative Characteristics of Useful Financial Information (Financial Accounting Standards Board (FASB), 2015a) and Proposed Accounting Standards Update, Notes to Financial Statements (Topic 235) Assessing Whether Disclosures Are Material (FASB, 2015b). In this article, the authors focus on the Chapter 3 amendments (FASB, 2015a), which proposes a new definition whose genesis is based on the US Supreme Court definition of the concept. Accordingly, the authors examined the views of two stakeholders in the US financial reporting system, auditors in large public accounting firms, and Chief Financial Officers of the Fortune 1000 companies, regarding their perceptions of the proposed definition. The authors developed the research instrument to evaluate their perceptions of the proposed definition’s potential impact on various aspects of the audit and financial reports. The authors found that both populations have negative perceptions of the materiality definition in the exposure draft and an interpretation of the responses did not indicate an addition of any benefits from its adoption. Subsequent to our solicitation for our subjects’ opinions, the FASB voted unanimously in November 2017 to remove the reference to materiality as a legal concept (FASB, 2017) and in August 2018 (FASB, 2018) amended FASB Concept Statement No. 8 to replace the materiality definition with language similar to the previously superseded FASB Concept Statement No. 2. However, as the authors will explain in this article, the fact that three authoritative definitions exist, which continue to present problems for financial statement preparers and auditors. In this analysis, the authors find evidence that auditors and investors continue to see a significant difference between the terminology of “users” and “reasonable resource provider” within the various materiality definitions.

In 2009 and 2010, the Financial Accounting Standards Board (FASB) adopted new accounting standards for nonprofit mergers and acquisitions. The new accounting standards are an example of the constitutive role accounting can play in how people think about economic events, since the FASB defined a new concept (the “inherent contribution”) and required valuation of intangible assets that were often previously unrecognized.

The FASB’s stated goals included minimizing “pooling” accounting and maximizing transparency regarding fair value information, acquired identifiable intangible assets, and the relation between consideration paid and the fair values of identifiable assets acquired. The FASB expected many combinations would involve little or no consideration. It also expressed concern that some organizations would undervalue assets acquired, especially intangible assets.

For a sample of 2012–2017 nonprofit hospital combinations, we find general agreement with the FASB’s expectations. Almost all combinations were accounted for as acquisitions, not mergers, even though there was frequently no consideration paid. More acquirers recorded “inherent contributions” than goodwill, because the net fair value of the acquired hospital’s identifiable assets exceeded the consideration paid. Acquirers ascribed value to assets, such as intangible assets, that would have gone unreported under the prior accounting rules, although lower levels of intangible assets were recognized in nonprofit business combinations, relative to total non-goodwill assets acquired, than in public companies’ acquisitions.