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 ($)
How to Calculate Materiality?
The following steps outline how to calculate the Materiality.
- First, determine the total revenue or expenses ($).
- Next, determine the total assets ($).
- Next, determine the net profit before tax ($).
- Next, gather the formula from above =M = .0075 * R + .015 * A + .075 * P
- Finally, calculate the Materiality.
- 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 = ?
