Enter the total revenue or expenses ($), the total assets ($), and the net profit before tax ($) into the Materiality Calculator. The calculator will evaluate the Materiality. 

Materiality Formula

The following formula is used to calculate the Materiality. 

M = .0075 * R + .015 * A + .075 * P

Variables:

  • M is the Materiality ($)
  • R is the total revenue or expenses ($) 
  • A is the total assets ($) 
  • P is the net profit before tax ($) 

How to Calculate Materiality?

The following steps outline how to calculate the Materiality.

  1. First, determine the total revenue or expenses ($).
  2. Next, determine the total assets ($). 
  3. Next, determine the net profit before tax ($). 
  4. Next, gather the formula from above =M = .0075 * R + .015 * A + .075 * P
  5. Finally, calculate the Materiality.
  6. After inserting the variables and calculating the result, check your answer with the calculator above. 

Example Problem:

Use the following variables as an example problem to test your knowledge.

total revenue or expenses ($) = 50000

total assets ($) = 10000

net profit before tax ($) = 30000

M = .0075 * R + .015 * A + .075 * P =  ?