How to Explain Rounding Discrepancies on a Statement

Statements, including financial statements, often have rounding discrepancies. Differences could be large, although most often they are small and insignificant. Some people might find rounding discrepancies disturbing, so it is often a good idea to keep non-rounded reports and backup documentation available just in case, to show "real" numbers.

Instructions

1

Make sure you have a rounding policy in place so that rounding is done based on a set procedure, not personal preferences. Numbers are normally rounded because the details are not important to the overall message of a statement. For example, suppose sales were $990.30, rounded up to $1,000.00--the difference is not that material nor significant. You might have a rounding policy for local offices and another one for consolidation level reporting. The point is to make it consistent and objective.

2

Explain how too many numbers confuse real issues. When numbers are not rounded, they can cloud issues and provide distraction from analysis and important issues. Too many digits might indicate accuracy, but they can create confusion when shown in a statement with other numbers. Very few people care about cents, so most financial statements are shown without cents, only dollars. Depending on the size of a business, rounding to hundreds or thousands might make sense and help in clarifying financial situations. For instance, it is easier to read and analyze sales of $100,000 and expenses of $65,000, rather than sales of $98,867 and expenses of $64,786.

3

Consider software rounding issues. Many spreadsheet programs and other software round numbers. You can control how many digits you want an amount to have. Rarely does it makes sense to have a number like 54.9823675122276 in statements. Sometimes the challenge is that the balance sheet, a standard financial statement doesn't balance because of a $1 or $10 difference. Usually a manual entry is done on the statement alone to balance it.

4

Disclose the rounding of figures in the report itself. When rounding numbers in a statement, make a note after the title and date so that people know what they are looking at. Be upfront about it.