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Variance analysis - sign conventions.


A label and sign convention in financial reporting.

It is designed to aid the interpretation of differences or changes, by specifying a consistent convention.

Under the B/(W) convention, good news is denoted by a POSITIVE number.

Good news is also known as a 'favourable variance'.

For example, a cost saving or an income improvement.

A common example is a better actual result, compared with an earlier forecast.

Under the B/(W) convention NEGATIVE numbers are bad news, 'worse'.

Bad news is also known as an 'adverse' variance.

(B)/W convention

Sometimes the opposite convention is used.

This is the (B)/W convention.

Under the (B)/W convention - positive numbers are worse, i.e. adverse.

Under the (B)/W convention NEGATIVE (bracketed) numbers are better and favourable.

See also