Industry
↳ Revenue is used for high-growth entities where PBT may not reflect scale.
Benchmark
Performance Materiality
Reduces the probability that uncorrected misstatements exceed overall materiality.
Clearly Trivial
Misstatements below this need not be accumulated unless qualitatively material.
ISA 320 Decision Tree
One-page visual guide for benchmark selection — plus one practical audit insight per week.
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Benchmark Guidance
Technology companies frequently prioritise growth over profitability, making profit before tax an unreliable or even meaningless benchmark (it may be negative). Revenue provides a more stable and representative measure of the entity's scale.
Choosing the Right Benchmark
Revenue at 0.5–1% is typical for technology companies. For pre-revenue or very early-stage entities, total expenses or cash burn rate may be the only meaningful benchmark. For mature technology companies with stable profitability, PBT at 5% can be appropriate.
Key Audit Considerations
Revenue recognition under IFRS 15 is the primary risk area — multi-element arrangements, SaaS revenue timing, usage-based pricing, and contract modifications all introduce complexity.
Capitalisation of development costs under IAS 38 requires judgment about technical feasibility, future economic benefits, and amortisation periods.
Share-based payment expenses (IFRS 2) can be material for technology companies and involve significant estimation.
Deferred tax assets from accumulated losses require assessment of recoverability based on future profitability projections.
ISA 320.10 — Determine materiality for the financial statements as a whole when establishing the overall audit strategy.
ISA 320.11 — Determine performance materiality for assessing risks and determining further audit procedures.
ISA 320.A4 — Common benchmarks: PBT, revenue, gross profit, total expenses, total equity, or net asset value.