Chapter 2 - Conceptual Framework for Financial Reporting - Review and Practice - Bridge to the Profession - Codification Research Case - Page 74: b

An existing rule provides that in cases where omissions or misstatements are less than 5% of the set threshold, then such misstatements are immaterial and vice versa. FASB illustrates how total overstatements could account for 4% of net income, so the earnings per share are overstated by 0.02. In this case, the auditor concludes that the overstatements are immaterial because the overstatement did not exceed the 5% threshold ("FASB, 250-10-S99-1").

An existing rule provides that in cases where omissions or misstatements are less than 5% of the set threshold, then such misstatements are immaterial and vice versa. FASB illustrates how total overstatements could account for 4% of net income, so the earnings per share are overstated by 0.02. In this case, the auditor concludes that the overstatements are immaterial because the overstatement did not exceed the 5% threshold ("FASB, 250-10-S99-1").