Your aunt recently received the annual report for a company in which she has invested. The report notes that the statements have been prepared in accordance with IFRS. She has also heard that certain terms have special meanings in accounting relative to everyday use. She would like you to explain the meaning of terms she has come across related to accounting.

Instructions

(a) How is “materiality” defi ned in the framework?

(b) Briefly discuss how materiality relates to (1) the relevance of financial information, and (2) completeness.

(c) Your aunt observes that under IFRS, the financial statements are prepared on the accrual basis. According to the framework, what does or “accrual basis” mean?