The directors of a company are unsure whether to amend the financial statements to include an additional $150,000 of doubtful debts. According to the guidelines in AASB 1031, this amount would be considered material if it represents 20% of total receivables. Materiality under the standard is presumed if an amount is 10% or more of the appropriate base. In this case, receivables are the appropriate base for measuring doubtful debts.

1. The directors of the company are undecided as to whether they should amend the financial
statements to provide for additional doubtful debts of $150 000 as at 30 June 20X2. In
accordance with the quantitative guidelines in AASB 1031 Materiality , the additional doubtful
debts of $150 000 would be material as it represents:
Select one:
a. 2.5% of total equity
b. 20% of total receivables
c. 4.6% of total current assets
d. 60% of total cash
plz explain in detail
Solution
According to AASB1031, an amount which is equal to or greater than 10 per cent of the
appropriate base amount may be presumed to be material unless there is evidence or convincing
argument to the contrary.
Doubtful debts arises from account receivables. Therefore, the additional doubtful debts of $150
000 would be material if it represents 20% of total receivables.
Thus, (b) is the answer.
Hope this helps!