Financial Variance Analysis Task
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A Financial Variance Analysis Task is a financial analysis task that is a variance analysis (to investigate financial variances).
- Context:
- It can (typically) produce a Financial Variance Analysis Report.
- …
- Example(s):
- Counter-Example(s):
- See: Management Accounting, Statistical Variance Analysis.
References
2016
- (Wikipedia, 2016) ⇒ http://wikipedia.org/wiki/variance_(accounting)#Variance_Analysis Retrieved:2016-4-14.
- Variance analysis, in budgeting (or management accounting in general), is a tool of budgetary control by evaluation of performance by means of variances between budgeted amount, planned amount or standard amount and the actual amount incurred/sold. Variance analysis can be carried out for both costs and revenues.
Variance analysis is usually associated with explaining the difference (or variance) between actual costs and the standard costs allowed for the good output. For example, the difference in materials costs can be divided into a materials price variance and a materials usage variance. The difference between the actual direct labor costs and the standard direct labor costs can be divided into a rate variance and an efficiency variance. The difference in manufacturing overhead can be divided into spending, efficiency, and volume variances. Mix and yield variances can also be calculated.
Variance analysis helps management to understand the present costs and then to control future costs.
- Variance analysis, in budgeting (or management accounting in general), is a tool of budgetary control by evaluation of performance by means of variances between budgeted amount, planned amount or standard amount and the actual amount incurred/sold. Variance analysis can be carried out for both costs and revenues.
2014
- https://www.mcgill.ca/financialservices/reporting/yearendvariances
- QUOTE: Variance analysis reports help quantify and identify the difference in actual expenditures or revenues between fiscal years and quarters. In some cases, variance is calculated by comparing budget to actuals and in others the comparison is based solely on actuals.
- https://www.mcgill.ca/financialservices/files/financialservices/variance_analysis_how_to_1.pdf
- QUOTE: … Review the report for all line-items identified in red as they represent variances of +/- $100,000. These are the line-items requiring further explanations. …
2013
- http://www.simkover.com/search2.shtml?search=Variance%20analysis
- QUOTE: Variance analysis - This term normally refers to the reasons for the variances between actual financial statement data and the corresponding budget or prior year data. For example, the income statement contains different kinds of revenue and expense items such as office expense and cost of sales, which may be disclosed on the statement alongside the original budgeted amounts for the same time period, as well as the prior year amounts for the same line items. The purpose for this kind of disclosure is to indicate the extent of change versus prior year and budget, which of course raises questions if the change is significant. If sales have increased by 5% over the prior year but cost of sales has increased by 22%, this would seem to indicate that the cost of production has gone up for some reason, on every unit produced. Variance analysis consists of two stages: first the identification of the variances, and secondly the explanation of the reasons for the variances. Variance analysis is also used for the balance sheet to explain differences in the assets and liabilities. For example, the current liabilities may have increased significantly over the prior year, but analysis may show that it is not the accounts payable that is the culprit, but rather the creation of a new line of credit that was set up to finance the acquisition of new equipment. Variance analysis is not normally disclosed as an integral part of the financial statements in Canada although it is a requirement to disclose the prior year column for comparison purposes. Chartered accountants will do the variance analysis as part of the audit or review requirements, and maintain the conclusions in their file as evidence of having conducted an appropriate degree of investigation of unusual numbers on the financial statements. Internal accountants will also do the variance analysis in even more depth so that trends can be explained to management as a tool for running the business and making decisions based on current information. This is especially true for monthly financial statements. In such cases, the analysis is normally done versus the same month in the prior year, and also versus the prior month in the same year and the budget for the current month.