The Application of Variance Analysis in FP&A Organizations: Survey Evidence and Recommendations for Enhancement

Abstract

Accounting Variance Analysis, a tool widely taught in academic environments, is important to the financial planning and analysis (FP&A) departments of firms. However, there is a dearth of evidence on how variance analysis is really applied in practice. Investor relations quarterly presentations demonstrate a wide variety of formats and variance buckets. Our survey of the FP&A department of organizations finds that while variance analysis is viewed as a very valuable tool, there is significant variation on its actual use. We conclude with recommendations to improve usage of variance analysis.