Submitted by: Submitted by 26seejanelle
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Date Submitted: 11/11/2015 05:46 AM
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...