An adverse variance (also called an unfavourable variance) occurs when actual results are worse than budgeted or standard results.

Simple Meaning:

It means the company performed worse than expected.

Examples:

Actual expenses are higher than budgeted expenses

Actual sales are lower than expected

Actual production cost is more than standard cost

Example:

Budgeted material cost = ₹1,00,000
Actual material cost = ₹1,20,000
Adverse variance = ₹20,000

Meaning:

It shows poor cost control or lower performance compared to the plan.

In short, an adverse variance indicates negative deviation from the budget or standard.