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Contexts where materiality matters
- inclusion: whether or not an item needs to be considered
- refinement: whether or not a number is accurate enough to convey intended message
- disclosure: whether or not a fact needs to be reported
- an omission, understatement or overstatement is material if the actuary expects it materially to affect either the user’s decision making or reasonable expectations
- it is not the range of reasonable values in an actuarial estimate
- it is not the inherent uncertainty associated with actuarial estimates
User is key
- user's perspective is typically the key element in materiality determinations
- actuary is not responsible to unintended users
- take reasonable steps to ensure that the work does not mislead the intended users
- consider who are the intended users, their knowledge and situation
Considerations when selecting materiality level
- purpose of the work: regulatory / appraisal / DCAT / financial statement etc.
- company characteristics: size / access to capital / stage of organizational life cycle
Areas for further research
- how does materiality relate to range of reasonable values and inherent uncertainty?
- should the actuary treat materiality differently in a internal user report?
- should the actuary consider disclosure about application of materiality?
- what communication is required when there is no written report?