Contents:
What is a variance?
Many tools and reports in Fathom calculate and show a variance between two values. A variance could be comparing a KPI result against its target or budget or comparing the value for an account against the corresponding value in a prior period.
An example of variance values can be found in the KPI Results analysis tool:
Variance Calculation Method
Each KPI or account in Fathom has an associated 'Unit of Measure'. The unit of measure determines the variance calculation:
For an account, the unit of measure is always 'Currency', meaning the values will display with the currency symbol. The currency is set in 'Step 2  Company Profile' of the company's Settings.
KPIs can have units of measure that can include percentage, currency, times, days, ratio or even a custom value.
Variance for currency
The currency variance result is presented as a percentage change. To calculate the variance for currency amounts:
Variance = (current value  prior period value) / prior period value 
π Note: For the above equation, we compare the current period's result to a prior period. If comparing the current result to the budget or target, the target or budget would replace the 'Prior period value' in the equation.
There are a couple of instances when Fathom switches to the 'difference' method and the result is not presented as a percentage change:

Variance for other units of measure (%, times, days, :1, custom)
If the unit of measure is not currency, then the variance is calculated as the difference between the two values.
Variance = current value  prior value 
We do not calculate a percentage variance between percentage values.
Example: If January has result of 10% and February has a result of 25%, the variance will be calculated as 15%. 
Positive and negative variance
When creating a KPI, Fathom allows you to specify whether a higher or lower result is favourable. This is useful for metrics where a lower value may be more favourable (such as Operating Expenses). The colours indicating variance, green for positive and red for negative, will be based on your selection.
For financial statements, Fathom assumes a higher or lower value is favourable depending on the classification of the account.
Positive and negative variance in financial statements
When calculating positive or negative variance in accounts, Fathom uses a mixture of methodologies to decide whether a higher or lower account value is more favourable.
π Note: For the Statement of Cash Flows, only the 'cash flow approach' is used to determine positive or negative variance.
Cash flow approach
For accounts generally found under operating cashflows, Fathom favours the impact of cash flow when considering the variance for these account classifications.
Using this approach, any negative impacts on cash flow are coloured red and positive impacts on cash flow are coloured green.
Example: An increase in Accounts Receivable, Inventory, or Work in Progress (WIP) is regarded as a negative change (coloured red), as increases in these accounts result in negative cashflows for the business. 
Business standpoint approach
For accounts that generally appear under investing or financing activities on the cash flow statement, such as Noncurrent assets or longerterm liability accounts (excluding Accounts Payable), Fathom favours a 'business standpoint' approach.
This approach looks at the overall position of the business, not just cash flow.
Example: While a decrease in accounts under the 'Tax Liability' classification would result in negative cashflows for the business, Fathom recognises this variance as a positive impact (coloured green), as tax liabilities and other longterm liabilities are more likely to incur interest expenses or other penalties at a higher balance or from lack of payment. 
π Note: For the Statement of Cash Flows, only the 'cash flow approach' is used to determine positive or negative variance.
Turning off colours for variance
We understand that mixing these two approaches may not suit all businesses, so we allow the option to turn off the variance colouring for a financial table in a report.

Additional knowledge & common questions: