Adjustment Entries in FloQast Consolidation allow you to book financial adjustments at the consolidated level. These entries include activities such as top-side adjustments, reclassifications, and eliminations, which are necessary to ensure that your consolidated financial statements are accurate and compliant with accounting standards.
An Adjustment Entry differs from a regular Journal Entry recorded in the general ledger. These adjustments are typically made at the corporate or consolidation level. They are essential for providing a true financial picture that adheres to regulatory standards and reflects intercompany eliminations or strategic adjustments. Adjustment Entries are generally made outside the regular accounting process, specifically for financial reporting purposes. They often reflect corporate-level decisions, strategic transactions, or compliance with accounting standards. [More details on booking Adjustment Entries will be covered in a separate help article here.]
Entity Selector: The Entity Selector in the upper-right corner allows you to choose the entity for which you’re viewing or booking adjustments. Adjustments are entity-specific and affect only the selected entity's financials.
Period Selector: Similar to the Home screen, the Period Selector enables you to choose the period for which you're viewing or booking adjustments. This ensures you're always working within the correct reporting period.
Expand Rows: Use the carrot button ( > ) next to each entry to expand it. Expanding a row reveals the details of the adjustment, such as:
Financial Statement Line Item (FSLI)
ERP Account
Debit/Credit amounts
Total amounts for each entry
Expand All: There is an Expand All button at the top of the adjustment entries table that expands all rows, showing sub-details for every adjustment. Once expanded, the button toggles to collapse all rows.
Add Adjustment Entry: Clicking the Add Adjustment Entry button allows you to create a new adjustment directly within the system. Adjustment entries can include activities like top-side entries for corporate-level adjustments, reclassifications of amounts, or eliminating intercompany transactions.
Adjustment Entries Table: This table displays all adjustment entries that have been booked in the selected period. You can see key details for each entry, including:
- Entry ID: A unique identifier for each adjustment entry. The default format is
[Year]-[Sequential Number](e.g., 2024-01-0001), ensuring each entry is traceable. However, customers have the flexibility to manually set this ID if they prefer, as long as the ID remains unique within the system. - Entity: The entity to which the adjustment applies. This helps users distinguish adjustments made across different entities in a multi-entity consolidation.
- Currency Type: Displays the functional currency of the entity for which the adjustment was made. This is particularly important in multi-currency consolidations, where adjustments may involve currency translations.
- Description: A brief description of the adjustment, such as "Reclass of other assets" or "Elimination of intercompany transactions." The description provides context for why the adjustment was made.
- Submitted Date: The date on which the adjustment entry was submitted. This helps track when the entry was made, especially useful for audit trails.
- Submitted By: Displays the name of the user who submitted the adjustment. This field provides accountability and ensures transparency in the consolidation process.
Reversing an Entry
In the Adjustment Entries Table, the kabob menu (⋮) is located on the far right of each entry. This provides the ability to create a reversing entry with a single click. This option saves time and reduces the potential for manual errors that can occur when manually creating reversals.
[Why it’s helpful: Creating reversals manually can lead to mistakes, and we've all had the experience of needing to reverse an incorrect reversal! This feature prevents users from getting into what some accountants call a "reversal death spiral," where you’re constantly correcting mistakes from earlier reversals. By automating this process, FloQast ensures that your reversals are accurate and efficient, reducing stress and the chance of error.]
When to Use Adjustment Entries
There are many ways to use adjustment entries in consolidation. Below are four common types of adjustments that accountants frequently make:
Top-Side Adjustments: These adjustments are made at the corporate level, often outside the operational ledgers. For example, they may include adjusting for management bonuses or strategic business decisions that impact the consolidated financials.
Reclassifications: Adjustment entries are used to reclassify amounts between accounts. This is important for presenting financial statements in accordance with financial reporting standards, such as moving a transaction from operating expenses to capital expenditures.
Eliminations: Intercompany eliminations are necessary to remove transactions between subsidiaries from the consolidated financial statements. These entries ensure that the financials are not overstated by counting intercompany transactions more than once.
Post-Close Adjustments: Sometimes, adjustments need to be made after the period has been closed. Post-close adjustments ensure that any missed or late entries are captured without needing to reopen the entire period. These adjustments typically affect comparative periods in reporting.
In the future, FloQast plans to integrate the Journal Entry Management (JEM) product with Adjustment Entries. This integration will provide users with the flexibility to decide whether adjustments should be processed as journal entries or as consolidation-specific adjustments, streamlining the overall workflow and enhancing user control over financial adjustments.