væsentlighed

Væsentlighed is a Danish term used in auditing and accounting to describe the concept of materiality or significance. In ordinary language, it also denotes importance or relevance in a given context. The core idea is to identify omissions or misstatements that are significant enough to affect users’ decisions.

In auditing, væsentlighed functions as a threshold for planning and evaluating the financial statements. A misstatement or omission is material if it could reasonably influence the economic decisions of users relying on the statements. Materiality is not a fixed number; it depends on the entity, the nature of the item, and the context. Auditors distinguish planning materiality, used to design procedures, from performance materiality, used to evaluate the effect of identified misstatements. Numerical thresholds are often calculated as a percentage of base figures such as net assets, revenue, or profit, but qualitative factors may override the numerical estimate.

Qualitative considerations include the impact on compliance with laws and covenants, the potential effect on significant accounts, or the possibility that a misstatement masks fraud. Even small misstatements can be material if they affect key indicators or regulatory requirements.

Outside auditing, væsentlighed appears in research design, policy analysis, and ethics to describe the level of importance assigned to a fact or outcome. The precise threshold for what is væsentlig depends on stakeholders and objectives.

Etymology: the word stems from væsentlig, meaning essential, with the abstract noun suffix -hed, forming a term for a state or quality. The concept has been part of Danish professional language since the mid-20th century.