The test to determine whether information which is otherwise relevant and faithfully represented, can be omitted, misstated or not disclosed separately without adversely affecting economic decision-making, is known as:
A) understandability.
B) materiality.
C) consistency.
D) comparability.

Question

Quizplus · Accepted Answer

This test is known as the materiality test, which determines whether an omission or misstatement of information would affect the decision-making of the users of financial statements. Materiality is a concept that suggests that only information that would influence the economic decision-making of users needs to be disclosed in financial statements. Understandability, consistency, and comparability are also important characteristics of financial information, but do not specifically relate to the materiality test.

The Test to Determine Whether Information Which Is Otherwise Relevant