Guidelines

GUIDELINES FOR PREPARING PROJECTED FINANCIAL

STATEMENTS

Before entering into the nitty-gritty of the precautions to be taken by the

professionals, first of all, I would like to throw some lights on the

definitions of the basics of the Projected Financial Statements:

WHAT IS FINANCIAL FORECASTS AND PROJECTIONS?

Financial forecasts and projections are two types of prospective financial

statements that attempt to reflect a company’s expected financial position

and expected results of operations.

FINANCIAL FORECAST

A financial forecast reflects, to the best of the company’s knowledge, the

expected financial results of a future period. It is based on expected

conditions and expected courses of action. It is to be noted that in almost

all situations, the party responsible for the prospective financial

statements is the management of the company.

FINANCIAL PROJECTIONS

A financial projection is different than a forecast in that it is based on

hypothetical assumptions. A projection reflects the financial position and

results of operations based on a “What if” type of scenario. It is to be

noted that only a financial forecast is appropriate for general use.

Now, I would like to touch upon those areas, which needs to be taken

care of and needs some fine-tuning before accepting any assignment of

preparing/compiling of projected financial statements.

PRECAUTIONS TO BE TAKEN BY THE PROFESSIONALS

BEFORE

COMPILING

PROJECTED

FINANCIAL

STATEMENTS

1.

Make sure that the assumptions used in preparing projected

financial statements are reasonable and supported by documentary

evidence. Though the compiler (i.e. Professional) is not under

obligation to gather the supporting evidences but he should be

aware of obvious inappropriate assumptions used to construct the

projected financial statements.

2.

The compiler of the projected financial statements needs not to be

independent but he must disclose lack of independence.

3.

Compiler should take...