What financial term describes a line item's difference between budgeted and actual amounts that won't reverse?

The term that accurately describes a line item's difference between budgeted and actual amounts that will not reverse is called a permanent variance.

Permanent variances occur when the actual expenditures differ from the budgeted amounts in a way that is not expected to be corrected or adjusted in future accounting periods. This often results from fundamental changes in cost structures, processes, or environmental factors that alter the expected financial outcomes indefinitely. For example, if a service or product becomes permanently more expensive due to market changes, this expense will remain higher over time, representing a permanent variance in the financial planning.

Understanding this concept is important for financial assessment and strategic planning within an organization, as it highlights areas where the original budget estimates were inaccurate, and indicates lasting impacts on budgeting and future decision-making.

In contrast, terms like temporary variance refer to differences that are expected to reverse in future periods; flexible costs can adjust based on activity level but do not describe the permanent nature of this financial difference; and fixed costs refer to costs that do not change with the level of output, which does not specifically capture the idea of unreversible variances.