Making Materiality Judgments in Government: What IPSAS ED 97 Means
In April 2026 the International Public Sector Accounting Standards Board (IPSASB) released Exposure Draft 97, a draft IPSAS Practice Statement called Making Materiality Judgments. It is open for comment until 28 August 2026. Here is the short version of what it is and why it matters.
The basics
IPSAS is the global accounting rulebook for governments and public bodies, the public-sector counterpart to IFRS. It aims to improve the quality of public sector financial reporting, leading to better informed assessments of the resource allocation decisions made by governments, and thereby increasing transparency and accountability.
Materiality is the test of whether information matters enough to include, in the sense that leaving it out or burying it could change how a reader judges the entity. In business that reader is usually an investor. In government it is taxpayers, citizens, donors, lenders, and their representatives, and the key question is whether public funds were raised and spent as intended. That is why a small amount can still be highly material in government because of its nature: money spent outside the law, a related-party payment, or a budget breach can matter even when the figure is tiny.
There is also a practical reason management should take materiality seriously regardless of whether guidance is compulsory: auditors already do. External auditors set materiality and build their work around it through their risk assessments. If management does not think about materiality the same disciplined way, the two sides end up misaligned and year-end gets harder. Applying it consistently is simply good practice.
Is this used in South Africa?
Yes, it is but not directly. South Africa uses Generally Recognised Accounting Practice (GRAP), set by the Accounting Standards Board. GRAP is largely aligned with accrual-basis IPSAS, although many government departments still apply a modified cash basis while National Treasury pursues accrual reforms. GRAP is based largely on IPSAS, adapted to a public service context, and is mandatory for bodies such as municipalities, public entities, and the legislatures. Because the GRAP materiality definition mirrors the IPSAS one, what the IPSASB decides here tends to feed through locally over time, so ED 97 is well worth watching even though it does not apply directly.
What ED 97 proposes
Today IPSAS defines what material information is but says little about how to decide. The definition is settled; the applied guidance has been missing.
ED 97 is embarking on filling this gap. It does not change the definition or any obligation to disclose, it only clarifies how to apply what already exists. The core of it is a four-step process:
Identify information that could be material,
Assess it using both quantitative and qualitative factors,
Organise it so material points are not buried, and
Review the statements as a whole.
It is explicit that you should not lean on a single fixed percentage threshold, and that a qualitative factor can lower the threshold, sometimes to zero. It also covers prior-period information, errors, and loan covenants, with public-sector worked examples.
The main public-sector adaptation is the user base: not investors and lenders, but service recipients and resource providers, with materiality serving accountability rather than investment decisions. A dissenting board member argues it is still not adapted enough, particularly on the approved budget and on qualitative factors, which weigh more heavily in government.
Bottom line
Nothing in ED 97 changes an existing requirement, but "optional" does not mean "skip it." Auditors apply materiality whether or not management does, so management is better off doing the same. The shift is from "here is the definition, apply it as best you can" to "here is a structured method," aimed at cutting checklist-style over-disclosure and making public-sector statements more useful. Comments are due to the IPSASB by 28 August 2026, and anyone can respond, South African bodies included.