Financial Forecasts and Projections

1 FinancialForecastsandProjections1473AT Section 301 Financial Forecasts and ProjectionsSource: SSAE No. 10; SSAE No. 11; SSAE No. when the date of the practitioner s report is on or after June 1, 2001,unless otherwise section sets forth standards and provides guidance to practition-ers who are engaged to issue or do issue examination (paragraphs .29 .50),compilation (paragraphs .12 .28), or agreed-upon procedures reports (para-graphs .51 .56) on prospective Financial a practitioner (a) submits, to his or her client or others,prospective Financial statements that he or she has assembled, or assisted in as-sembling, that are or reasonably might be expected to be used by another (third)party1or (b) reports on prospective Financial statements that are, or reasonablymight be expected to be used by another (third) party, the practitioner shouldperform one of the engagements described in the preceding paragraph.

2 In de-ciding whether the prospective Financial statements are or reasonably mightbe expected to be used by a third party, the practitioner may rely on eitherthe written or oral representation of the responsible party, unless informationcomes to his or her attention that contradicts the responsible party's represen-tation. If such third-party use of the prospective Financial statements is notreasonably expected, the provisions of this section are not applicable unlessthe practitioner has been engaged to examine, compile, or apply agreed-uponprocedures to the prospective Financial section also provides standards for a practitioner who is engagedto examine, compile.

3 Or apply agreed-upon procedures to partial partial presentation is a presentation of prospective Financial informationthat excludes one or more of the items required for prospective Financial state-ments as described in appendix A [paragraph .68], "Minimum PresentationGuidelines.".04 The practitioner who has been engaged to or does compile, examine,or apply agreed-upon procedures to a partial presentation should perform theengagement in accordance with the guidance in paragraphs .12 .28 for com-pilations, .29 .50 for examinations, and .51.

4 56 for agreed-upon procedures,respectively, modified to reflect the nature of the presentation as discussed inparagraphs .03 and .57 . section does not provide standards or procedures for engage-ments involving prospective Financial statements used solely in connectionwith litigation support services. A practitioner may, however, look to thesestandards because they provide helpful guidance for many aspects of suchengagements and may be referred to as useful guidance in such support services are engagements involving pending or potentialformal legal proceedings before a trier of fact in connection with the resolution1 However, paragraph.

5 59 permits an exception to this for certain types of budgets. 2016, AICPAAT a dispute between two or more parties, for example, when a practitioner actsas an expert witness. This exception is provided because, among other things,the practitioner's work in such proceedings is ordinarily subject to detailedanalysis and challenge by each party to the dispute. This exception does notapply, however, if either of the following practitioner is specifically engaged to issue or does issue an exami-nation, a compilation, or an agreed-upon procedures report on prospec-tive Financial prospective Financial statements are for use by third parties who,under the rules of the proceedings, do not have the opportunity foranalysis and challenge by each party to a dispute in a legal example.

6 Creditors may not have such opportunities when prospective fi-nancial statements are submitted to them to secure their agreement to a planof reporting on prospective Financial statements, the practitioner maybe called on to assist the responsible party in identifying assumptions , gath-ering information, or assembling the responsible party isnonetheless responsible for the preparation and presentation of the prospectivefinancial statements because the prospective Financial statements are depen-dent on the actions, plans, and assumptions of the responsible party, and only itcan take responsibility for the assumptions .

7 Accordingly, the practitioner's en-gagement should not be characterized in his or her report or in the documentcontaining his or her report as including "preparation" of the prospective finan-cial statements. A practitioner may be engaged to prepare a Financial analysisof a potential project where the engagement includes obtaining the informa-tion, making appropriate assumptions , and assembling the presentation. Suchan analysis is not and should not be characterized as a forecast or projectionand would not be appropriate for general use. However, if the responsible partyreviewed and adopted the assumptions and presentation, or based its assump-tions and presentation on the analysis, the practitioner could perform one ofthe engagements described in this section and issue a report appropriate forgeneral concept of materiality affects the application of this section toprospective Financial statements as materiality affects the application of gen-erally accepted auditing standards (GAAS)

8 To historical Financial is a concept that is judged in light of the expected range of rea-sonableness of the information; therefore, users should not expect prospectiveinformation (information about events that have not yet occurred) to be as pre-cise as historical the purposes of this section the following definitions Prospective Financial statements Either Financial Forecasts or finan-cial Projections including the summaries of significant assumptionsand accounting policies. Although prospective Financial statementsmay cover a period that has partially expired, statements for peri-ods that have completely expired are not considered to be prospective2 Some of these services may not be appropriate if the practitioner is to be named as the personreporting on an examination in a filing with the Securities and Exchange Commission (SEC).

9 SECR elease Nos. 33-5992 and 34-15305, "Disclosure of Projections of Future Economic Performance," statethat for prospective Financial statements filed with the commission, "a person should not be named asan outside reviewer if he actively assisted in the preparation of the projection ."AT 2016, AICPAF inancialForecastsandProjections1475finan cial statements. Pro forma Financial statements and partial pre-sentations are not considered to be prospective Financial Partial presentation A presentation of prospective Financial informa-tion that excludes one or more of the items required for prospectivefinancial statements as described in appendix A (paragraph.)

10 68), "Min-imum Presentation Guidelines." Partial presentations are not ordi-narily appropriate for general use; accordingly, partial presentationsshould be restricted for use by specified parties who will be negotiatingdirectly with the responsible Financial forecast Prospective Financial statements that present, tothe best of the responsible party's knowledge and belief, an entity'sexpected Financial position, results of operations, and cash flows. A fi-nancial forecast is based on the responsible party's assumptions re-flecting the conditions it expects to exist and the course of action itexpects to take.