explain how "materiality" is defined by both fasb and iasb

Firstly we want know what is FSAB and IASB

FASB stands for Financial Accounting Standards Board. It is an non profit organisation which is responsible to establish Accounting and Financial reporting Standards for the firms and Non profit organisations in USA.

IASB stands for  International Accounting Standards Board. It is an non profit organisation which is responsible to establish Accounting and Financial reporting Standards for the firms and Non profit organisations applicable internationally.

Materiality:

In the context of financial reporting process, materiality is concept of relative importance or weight of any particular item to be part of financial statement. Those items which are of sufficient importance to effect the decisions of users of financial statements.

In FASB Materiality is to disclose relavent information by reducing immaterial items from the financial statements.

In ISAB Information is material if such omission and misstatement that could influence the decision making of users of users of financial statement of any entity.

Example = 1 Non compliance of Standards on accounting.

2. .Non compliance of laws and regulations, were by resulted in payment of substantial amount of penalty should be appropriatly disclosed there by to give attention to users.

Quantitative materiality guidelines:

The organisation is required to disclose which is material for the decision making of the users of the financial statements both Quantitively and Qualitatively.  The materiality guidelines should be quantified because then only the users of the financial statements will be aware of the exact amount of misstatement and can take the decisions based upon that amount.

Example

1.) 0.5 - 1 % of Total Revenue.

 2,) 2 - 3% of EBITDA

 3.) 5% of Net income