If you’ve ever read an audit report, you’ve probably seen a line like:
“The financial statements present fairly, in all material respects…”
Or when preparing your annual statements, you might be asked to:
These terms sound technical — but the ideas behind them are actually pretty simple.
This guide breaks them down in plain English.
It’s easy to think financial statements are black and white:
But as your organisation grows, things get messier:
At that point, trying to be perfectly accurate to the dollar isn’t realistic.
Instead, financial reporting focuses on something more useful:
Is this a fair and accurate overall picture?
This is about honesty and usefulness. If someone reads your financial statements, would they come away with a clear and truthful understanding of your organisation? That’s what “presents fairly” means.
It does not mean:
It does mean:
Materiality is about what actually matters.
A simple test: Would this change how someone understands your organisation?
You’ve finished your accounts and then discover:
Same situation — very different impact.
There’s no fixed rule like:
“Anything over $X is material”
Materiality depends on:
This guide is about understanding the idea — not calculating thresholds.
In Tier 4 financial statements, you’ll often be asked to list significant assets or liabilities. “Significant” is essentially a friendlier version of material.
It means: Things that matter to how someone sees your organisation
Significant assets:
These matter because they:
Not usually significant:
They’re useful — but they don’t change the overall picture.
Financial reporting isn’t about being 100% correct. It’s about being:
That’s what auditors mean when they say:
“presents fairly, in all material respects”
When preparing financial reporting:
Not every minor difference will change that big picture — but it’s important not to dismiss issues too quickly.
Where something is uncertain, borderline, or potentially important:
The goal isn’t to be casual about small differences — it’s to ensure that they're not misleading.
That’s exactly what we’re here for! At Good Numbers, we:
👉 Explore our guides or try the tools at goodnumbers.nz
Disclaimer
This guide is intended to support understanding of common accounting concepts for people working in small non-profits in Aotearoa New Zealand. It provides general information only and does not constitute accounting, audit, or financial advice.
It should not be relied upon by professionals, nor used as a basis for determining materiality thresholds or making specific financial reporting decisions. Where accuracy or judgement is important, you should seek appropriate professional advice.
Ask Duncan anything — big or small. He’ll get back to you ASAP, and your questions will help improve the information here for everyone.
