What does materiality in accounting mean?

Materiality in accounting refers to the principle that all significant or relevant information must be disclosed in financial statements to ensure that users can make informed decisions based on those statements. This concept is crucial because it helps to determine what constitutes important information that could influence the decisions of investors, creditors, and other stakeholders.

When applying the materiality principle, accountants assess whether the omission or misstatement of information could impact the economic decisions of users. In this way, the focus is not on every single piece of information, but rather on those details that are substantial enough to affect decision-making.

The other options do not correctly encapsulate the concept of materiality. For instance, while auditing is important for ensuring reliability, not all financial information needs to be verified by an auditor. Presenting financial information in the same format is a matter of consistency and comparability, but does not directly relate to the idea of materiality. Additionally, the notion that only positive financial events should be reported contradicts the principle of transparency and objectivity in financial reporting, as it is essential to disclose both positive and negative aspects of a company's financial performance.