What does it mean by topside in audit
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An entry that is reflected in the financial statements but not the general ledger. Usually they’re related to correcting ledgers of subsidiaries, like if there were sales between subs, those shouldn’t be shown as income and expenses on the consolidated statements because they’re usually not made at the same margin as normal sales. A topside entry would reverse them
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I’ve normally seen it for reclass entries or elimination entries. A reclass for example to reclass credit balances in A/R to a liability, most G/L systems don’t allow entries to A/R that aren’t at an invoice/customer level.
An adjustment that is put in late to make things tie is laymens term
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M1 is right, but only when the people making the adjustments has any idea what theyre doing haha
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The opposite of a power bottom.
I think pwc 1 would be a fun person o have on the team
It’s making a correcting entry at a higher level.
For example, say you know the final answer to something should be 100. However, to get to that final number, it takes multiple subprocesses to flow up to that final number. Now let’s say the audit is due in a couple of days. Instead of correcting the mistake at the bottom and flowing it through all the sub processes, you just make an adjustment to the final number to get to the 100 that you know should be the answer.
In a perfect world with infinite time, there wouldn’t be topside adjustments. But we’re overworked accountants so topside adjustments provide a quick fix.
I’ll try to simplify -> A topside is a essentially a journal entry that can be recorded high level when the ledger for the month/year has closed. For example, it’s middle of January and you’ve already closed the ledger but you’ve realized you needed to record an additional $100K of severance expense. If the ledger was open, you could have recorded directly to severance expense, but now you will record this expense at the “general expenses” where a bunch of expenses are bucketed together. Then the next period when the ledger is open you will “push down” the topside from the prior period - what this means is the ledger is open again (February now) and you will record the severance expense into the ledger and now your financials are correct. And it is permanently recorded.
A topside only stays good for the period is was booked to. So in February, your year to date expenses would not show the $100K because you did not re-instate the topside again that period. If you looked at the year to date balance thru January, it would.
From a system perspective -> My company uses JDE for all ledger activity. Once a period closes we load all the JDE data to another system called Oracle. When needed, Topsides are booked in Oracle. So Oracle will show account balances of JDE + Topsides. So Next open period (February) i can record the severance expense, I’ll record it in JDE. Then come monthly close, I’ll load the year to date data (January to feb) from JDE to Oracle. So now Oracle shows the severance piece. You will not re-instate the topside bc that would be double counting it now that you pushed it down in February.
I wouldn’t say usually - each month/quarter we have a mix of balance sheet and P&L entries. Not solely balance sheet to balance sheet entries. Rolling to RE only gets tricky crossing years vs. Interim topsides. & there is a special process for the 12/31 topsides.
Opposite of bottom side
Off ledger adjustments made directly on the FS for presentation purposes.
In audit, the term "topside" generally refers to a journal entry that is made at the corporate or group level, rather than at the individual business unit or subsidiary level. These entries are typically made to adjust account balances or financial statements at the top level to correct errors or reflect changes in accounting policies or estimates. The purpose of topside entries is to ensure that the consolidated financial statements accurately reflect the financial position and performance of the entire organization. Topside entries are often made by the corporate accounting department or other centralized accounting function, and are subject to review and approval by auditors to ensure their accuracy and appropriateness.