Discuss the ways to interpret financial statements by using Budget variance analysis and Best practices.© BrainMass Inc. brainmass.com October 4, 2022, 12:41 pm ad1c9bdddf
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Discuss the ways to interpret financial statements by using Budget variance analysis and Best practices.
Budget variance analysis can be a very useful tool when interpreting financial statement data. The variance analysis, in its basic function, allows the user to quickly and easily determine where positive or negative variances are present, within the financial data. By utilizing budget variance analysis, users can compare the budgeted data or budget forecast against the financial statements. By doing so, the user can identify the areas that have variances, and then perform further analysis to determine the percentage of the analysis. The variances causes can then be investigated if the variance is unfavorable, to determine if corrective action is needed.
The most important best practice when interpreting financial statement data is to ensure that all material disclosures have been fairly presented. Due to current accounting standards and Sarbanes-Oxley requirements, this is a mandatory practice. The standard was designed to ensure that investors, creditors, and others that are interpreting the financial statement data are not mislead in any way, and that during their analysis, the user is able to evaluate all data that is financially relevant to the company's operations.