Which of the following items would most likely be a violation of the materiality constraint?
A)A company did not separately report an unusual gain of $50, 000.Its income from operations was $5, 000, 000.
B)A company having reported total assets of $20, 000, 000 immediately expensed the purchase of 20 pencil sharpeners that have an estimated useful life of three years.
C)A $25, 000 illegal bribe by an executive of the company to a foreign official was not separately disclosed in the annual report.
D)A $5, 000 expenditure to improve a building that originally cost $5, 000, 000 was immediately expensed.

Question

Quizplus · Accepted Answer

The materiality constraint requires that information that could influence the decisions of users should be disclosed. A $25,000 bribe is a significant amount and could influence the decisions of users of the financial statements, so it should be separately disclosed. The other options, while not necessarily ideal, do not violate the materiality constraint as they are not likely to influence the decisions of users.

Which of the Following Items Would Most Likely Be a Violation