Fathom allows you to make balanced adjustments to your accounts in order to correct accruals, and ensure your financial data is represented as accurately as possible. For instance, one of the most common use cases here is to accrue tax liability that has not yet been added to your books.
Adjustments in Fathom will change the ‘Actual’ figures imported from your source system. As such, these should typically be made in your source accounting system and only created in Fathom when absolutely necessary.
Once you have created an adjustment, you’re able to download an excel audit report which shows you the financial impact of all adjustments to future periods. We will talk more about this later in the article.
Potential use cases at the individual company level:
- Update Balance Sheet presentation
- Adjust tax accruals
- Reclassify specific transactions
Potential use cases at the consolidated group level:
- Run consolidated group level adjustments
- Multi-currency balance adjustments
To set up an adjustment, navigate to the company or group settings ‘Step 1: Update Data’ and scroll down to the ‘Adjustments’ area.
From here, you’ll need to first set a current earnings and retained earnings account. These links are required, and allow Fathom to push the earnings impact of any adjustments to the correct account on the balance sheet.
Once these links have been made, you can hit the green ‘+ Create adjustment’ button to start the journal. Give the entry a name and set up the debit and credit (increase/ decrease) amounts of the entry.
There can be more than two accounts involved in the adjustment, however all adjustments must balance. To add another account, hit the green ‘+ Add new line’ button. Before saving, add an adjustment period and a quick description of the entry.
💡Pro tip: The adjustment must have a name to be saved.
These adjustments can be changed or deleted at any time by returning to ‘Step 1: Update Data > Adjustments’. Adjustments will be automatically applied to the financials from your source accounting system.
To view financial impacts of all adjustments you have two options.
The first is an excel report that contains adjustments across all periods and summarises the current and retained earnings impacts. To download the excel report, navigate to the ‘Report Centre > Excel > Adjustments Audit’.
The second option is from a draft report. Here you’re able to add an adjustments table which shows all of the adjustments you have created for the group. To add this table to a report, navigate to a draft report and open up the ‘content library’ sidebar. From here, scroll down to the bottom of the ‘Financials’ group and select the ‘Adjustments’ table:
Adjustments in a Consolidated group?
To set up group level adjustments, navigate to the Group settings Step 1: ‘Update Data’ and navigate to the bottom where the ‘Adjustments’ heading is found. Here you’ll follow a similar workflow in that you’ll set the current and retained earnings linkages, then create adjustments.
These are handy for removing the inter-company impacts of items where there may be a partial inter-company balance, and the ’Chart of Accounts’ elimination approach does not work.
Once you have set up adjustments in the consolidated group, the excel report ‘Consolidated financial results, including eliminations’ will have an extra column called ‘Group Adjustments’ that sits just before the group eliminations columns.
The excel ‘Adjustments audit’ report and PDF ‘Adjustments’ table is available at the group level as well.
Performing Specific Group Adjustments
Using group level adjustments, you are able to ‘Adjust’ inter-company amounts.
To do this, navigate to the group settings ‘Step 1: Update Data’ and navigate to the Adjustments area. From here, link your current and retained earnings accounts, and set up the adjustment by hitting the green ‘Create Adjustment’ button’ The Adjustment Module will ask for an adjustment name, the accounts, their increase or decrease, a month and year of adjustment and an optional description.
Once adjustments have been added, the excel report ‘Consolidated Financial results’ will update with a group adjustments column. This allows you to go ahead and view the adjustments individual impact, independent of the group eliminations.
Creating Adjustments in companies with divisions
When you create adjustments at a company that contains divisions, you will have an additional ‘Adjustments’ column in your Financials by Division report component.
Frequently Asked Questions:
FAQ: Can I add a list of these adjustments to my PDF reports?
Yes you can! To add these, navigate to a draft report or custom template, and edit the report. From the left hand sidebar content library, navigate to ‘Financials & Tables’ and scroll to the bottom of the financials area. Drop and drag this ‘Adjustments’ table into the report. From here you can edit the table name by opening the side panel.
FAQ: Can I set up adjusting journal entries in a consolidated group?
Yes! Adjustments can be set at the individual or consolidated group level.
FAQ: Where can I see all of the adjustments I’ve created?
You can see these adjustments in two places - the excel reports area and in a PDF report component.
To download the excel adjustments report, navigate to the report centre and to the ‘Excel Reports’ area. From here, you’ll notice you have an excel report titled ‘Adjustments audit’.
From a draft PDF report you’re able to add an adjustments table which shows all of the adjustments you have created for the group. To add this table to a report, navigate to a draft report and open up the ‘content library’ sidebar. From here, scroll down to the bottom of the ‘Financials’ group and select the ‘Adjustments’ table.
FAQ: Can I delete an adjustment once it’s been created?
Yes. You can delete or edit an adjustment at any point by navigating to the ‘Adjustments’ area in ‘Step One: Update data’ of the company or consolidated group settings, and use the ‘Three-dot’ overflow menu to remove the adjustment.
FAQ: Can I edit an adjustment once it’s been created?
Yes. You can edit an adjustment once it’s been created. To do so, navigate to the Adjustments’ area in ‘Step One: Update data’ of the company or consolidated group setting. Select the adjustment you’d like to change and use the ‘Pencil’ or edit icon to open the editing panel for the given adjustment.
FAQ: Does Fathom check my source data to see if these adjustments have been made?
No. Fathom does not know if an adjustment that has been made in Fathom is now reflected in your source accounting system data. If the source accounting system is updated, you will need to ensure you delete any Fathom adjustments that were in place to correct the accounting data. For example, when the accountant prepares end-of-year income tax returns, and these are added to the source accounting data, any income tax adjustments for that period in Fathom can be removed.
FAQ: If I’ve applied adjustments to subsidiary companies that are used in a consolidated group, will these adjustments flow through?
Yes. These adjustments will flow through to the consolidated group and act as if they are a fully integrated part of the subsidiaries' actuals. Meaning that if you need to view the adjustments made to the subsidiary entity, you will need to navigate to the individual entity and download the excel report.
It’s worth noting that you can create adjustments at the group level, to partially eliminate accounts, or adjust the group balance.