Clarifying and protecting materiality standards in financial statements: Areview of SEC Staff Accounting Bulletin 99

Companies issuing financial statements for many years have solely used quan titative methods to determine materiality. In August 1999, the Securities a nd Exchange Commission released Staff Accounting Bulletin 99 (SAB 99) elimi nating this practice. SAB 99 now requires companies to use a qualitative an alysis to determine the materiality of misstatements or omissions. While qu alitative materiality must be used in some instances, with this almost pure ly subjective test, companies are now left open to liability for arguable c hoices in judgment. Furthermore, SAB 99 leaves open the question of issuer liability for immaterial misstatements contrary to standing statutory guida nce and case law.