Accounting rule makers are not generally known as flame-throwers. But with a new proposal, the Financial Accounting Standards Board has lobbed a miniature Molotov cocktail into the usually staid world of audit standards, upsetting investor groups and experts in the field.
The proposal would effectively change the definition of materiality, a mainstay of corporate financial disclosure that determines what a company must tell investors about its operations and results.
On its surface, that sounds tame enough. But bear with me: If you own stock in corporate America in any form, you need to understand what FASB is thinking of doing.
For decades information was deemed material if it could influence decisions made by users of financial statements, a.k.a. current and prospective shareholders or lenders.