i) Materiality
Materiality refers to the importance of information that could influence the decisions of users or affect the accountability of an entity. Information is considered material if its omission or misstatement could impact the decisions made by users based on the entity’s General-Purpose Financial Reports (GPFRs). Materiality depends on the nature and magnitude of the item in question, and its relevance is judged based on the specific circumstances of each entity. As GPFRs include both qualitative and quantitative information, it is not possible to establish a universal threshold for materiality; instead, it is determined based on professional judgment.

(2 marks)

ii) Cost-Benefit
The cost-benefit constraint emphasizes that the benefits derived from financial reporting should justify the costs incurred to provide that information. Assessing the balance between cost and benefit is often subjective, as it can be difficult to quantify all costs and benefits. When considering this constraint, it is necessary to evaluate whether some qualitative characteristics of the information might be compromised to reduce costs. The goal is to ensure that the information provided in GPFRs is beneficial enough to justify the resources spent in its preparation and dissemination.

(2 marks)