Materiality Benchmark
Dear All
When one determines the base / benchmark for materiality - you first decide on the base. Assets / Revenue etc. Amongst others one of the considerations is what is the originating cause of the income. This means how does a company obtain its revenue. For example in a Company that rents out it’s only asset the materiality is based on assets. It’s the renting out of the building space that generates the revenue.
However if the building is used as a clubhouse as part of a country club that charges membership fees so as to maintain the running of the club I do not believe that the building and the other assets of the country club can be used as a base to determine materiality.
If the law of country clubs requires the club to invest in shares to maintain the clubs solvency this still does not change the fact that materiality cannot be based on assets. Materiality is based on membership fees.
If materiality was based only on assets materiality would be far to high as the membership fees are not related to the assets themselves.
Steven Firer
When one determines the base / benchmark for materiality - you first decide on the base. Assets / Revenue etc. Amongst others one of the considerations is what is the originating cause of the income. This means how does a company obtain its revenue. For example in a Company that rents out it’s only asset the materiality is based on assets. It’s the renting out of the building space that generates the revenue.
However if the building is used as a clubhouse as part of a country club that charges membership fees so as to maintain the running of the club I do not believe that the building and the other assets of the country club can be used as a base to determine materiality.
If the law of country clubs requires the club to invest in shares to maintain the clubs solvency this still does not change the fact that materiality cannot be based on assets. Materiality is based on membership fees.
If materiality was based only on assets materiality would be far to high as the membership fees are not related to the assets themselves.
Steven Firer
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