Materiality

You may think that cannabis accountants sit around making up new terminology to complicate life or make ourselves look smarter. Well, it’s partially true I suppose, but we are way behind those in the tech business and social media! So what is this word materiality and why should you care? Here’s what and why. Materiality can be described as the degree of financial importance that is assigned to a transaction or a piece of information. The more material something is, the more important it is. Conversely, immaterial means that something is less important, of such little importance that it’s not necessary to mention it or report it. Materiality is often expressed in numeric terms but not always. For example, the basis of accounting you choose for your business is important in understanding your financial statements. A person reading your financials needs to know what basis you have chosen for reporting. It is material to them to know. Specific strains that you grow on your farm might not be a material item to report on your financials (although it could be, depending on your audience). If I am judging financial performance, strains are not that important to me but could be if one shows to be much more profitable than another. Determining materiality in numeric terms is usually a little easier than determining it for a piece of information. Materiality in numbers can vary all over the board in amount. A large, publicly traded company, might have a materiality factor that is many millions of dollars.   Your company, assuming you are not working with multi millions or billions (yet), is...