Chapter 40. PROSPECTIVE FINANCIAL STATEMENTS
Don M. Pallais, CPA
TYPES OF PROSPECTIVE FINANCIAL STATEMENTS
Prospective financial information is future-oriented; that is, financial information about the future. Prospective financial statements are future-oriented presentations that present, at a minimum, certain specific financial information.
The American Institute of Certified Public Accountants (AICPA) Guide for Prospective Financial Information (2002) defines prospective financial statements as presentations of an entity's financial position, results of operations, and cash flows for the future. In addition to the AICPA Guide, there is also a Statement on Standards for Attestation Engagements No. 10, Attestation Standards: Revision and Recodification: Chapter 3, "Financial Forecasts and Projections" (AT 301), which establishes standards for accountants' services.
Entity means an individual, organization, enterprise, or other unit for which financial statements could be prepared in conformity with generally accepted accounting practices (GAAP). It is not necessary for the entity to have been formed at the time the prospective financial statements are prepared—prospective financial statements may be prepared for entities that may be formed in the future. In fact, before committing capital to proposed entities, prospective investors or lenders often insist on seeing prospective financial statements covering the early years of proposed operations.
Although the AICPA Guide ...