What is the principle of relative importance?

The principle of relative importance or materiality is one of the most important rules established in accounting that serves to determine whether or not it is necessary to apply some of the accounting principles reflected in the Generally accepted accounting principles.

Thus, the concept of the principle of relative importance does not intervene in the company's annual accounts but has a margin of error for which there may be a small deviation in relation to the data provided. That is, although the data must be reliable and true, it is not precious that they are adjusted 100% of their totality.

On the other hand, the objective of the principle of relative importance is to define whether the items and the results of the same accounting period are important enough to alter (or not) the image of the company. In this way, it is guaranteed that financial statements of the company will reflect exclusively what has a much greater economic significance.

Leave a Comment