Chapter 21

Prospective Financial Statements

Don M. Pallais, CPA

21.1 Types of Prospective Financial Statements

(a) Definitions

(i) Financial Forecasts

(ii) Financial Projections

(b) Other Presentations That Look Like Prospective Financial Statements

(i) Presentations for Wholly Expired Periods

(ii) Partial Presentations

(iii) Pro Formas

(iv) Financial Analyses

21.2 Limitations on the Use of Prospective Financial Statements

(a) How Prospective Financial Statements Are Used

(b) General Use

(c) Limited Use

(d) Internal Use

21.3 Developing Prospective Financial Statements

(a) General Guidelines

(b) Identifying Key Factors

(c) Developing Assumptions

(i) Mathematical Models

(ii) Length of the Prospective Period

(d) Assembling the Prospective Financial Statements

21.4 Presentation and Disclosure of Prospective Financial Statements

(a) Authoritative Guidance

(b) Form of Prospective Financial Statements

(i) Amounts Presented

(ii) Titles

(c) Disclosures

(i) Description of the Presentation

(ii) Significant Assumptions

(iii) Significant Accounting Principles

(iv) Other Matters

21.5 Types of Accountants' Services

(a) Objective of Accountants' Services

(b) Standard Accountants' Services

(i) Prospective Financial Statements

(ii) Third-Party Use

(iii) Assemble and Submit

(c) Internal Use

(d) Prohibited Engagements

(e) Materiality

(f) Securities and Exchange Commission Perspective

(i) Compilations in Securities and Exchange Commission Filings

(ii) Independence

(g) Internal Revenue Service Perspective ...

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