Guide: Prospective Financial Information

Part 1 General Guidance Regarding Prospective Financial Information

1 Introduction 01- .14

Structure of the Guide .06- .07

Relationship to Other Literature .08- .13

Effective Date .14

2 Scope .01- .10

Presentations .01- .03

Practitioners’ Services .04- .10

3 Definitions .01- .16

4 Types of Prospective Financial Information and Their Uses .01- .09

5 Responsibility for Prospective Financial Information .01- .05

Part 2 Guidance for Entities That Issue Prospective Financial Statements

6 Preparation Guidelines .01- .46

7 Reasonably Objective Basis .01- .41

8 Presentation Guidelines .01- .51

Uses of a Financial Forecast .02- .02P

Responsibility for Financial Forecasts .03- .04

Title .05- .05P

Format .06- .10

Date .11

Accounting Principles and Policies .12- .16

Materiality .17

Presentation of Amounts .18- .21

Assumptions .22- .31

Period to Be Covered .32- .43

Disclosures at the End of the Forecast Period .35- .39

Disclosures About Periods Beyond the Forecast Period .40- .43

Distinguishing From Historical Financial Statements .44- .45

Correction and Updating of a Financial Forecast .46- .51

9 Illustrative Prospective Financial Statements .01- .05

Part 3 Guidance for Practitioners Who Provide Services on Prospective Financial Statements

10 Types of Practitioners’ Services .01- .32

Reporting Considerations .11- .13

Reasonably Objective Basis for Presentation .14- .15

Change in Engagement to a Lower Level of Service .16- .18

A Practitioner’s Responsibility for a Financial Forecast That Contains Disclosures About Periods Beyond the Forecast Period .19

A Practitioner’s Responsibility If a Financial Forecast Is Included in a Document Containing Historical Financial Statements .20- .23

Practitioner- Submitted Documents .20

Client- Prepared Documents .21- .23

Other Information in a Client- Prepared Document Containing a Financial Forecast .24- .31

Materiality .32

11 Tax Shelter Opinions .01- .10

12 Compilation Procedures .01- .13

Materiality .05

Training and Proficiency .06

Planning a Compilation Engagement .07- .10

Compilation Procedures .11

Documentation .12- .13

13 Illustrative Engagement and Representation Letters for a Compilation .01- .04

Engagement Letter .01- .01P

Representation Letter .02- .04

14 The Practitioner’s Compilation Report .01- .18

Modifications of the Standard Compilation Report .09- .13

Presentation Deficiencies or Omitted Disclosures .09- .11

Reporting on Information Accompanying a Financial Forecast in a Practitioner-Submitted Document .12- .13

Other Reporting Examples .14- .18

Reporting on a Financial Forecast That Includes a Projected Sale of an Entity’s Real Estate Investment at the End of the Forecast Period .16

Reporting If the Financial Forecast IncludesDisclosures About Periods Beyond the Forecast Period .17- .18

15 Examination Procedures .01- .54P

Materiality .05

Training and Proficiency .06- .07

Planning an Examination Engagement .08- .11

Examination Procedures .12- .40

The Responsible Party’s Experience in Preparing

Financial Forecasts .15

Prospective Period .16- .17

Process by Which the Responsible Party Develops Its Financial Forecasts .18- .19

Procedures to Evaluate Assumptions .20- .20P

Development of Assumptions .21- .22

Support for Assumptions .23- .31

Support for Tax Assumptions .32- .34

Evaluating Preparation and Presentation .35- .38P

Using theWork of a Specialist .39

Assumptions Dependent on the Actions of Users .40

Documentation .41- .48

Illustrative Examination Procedures .49- .54P

16 Illustrative Engagement and Representation Letters for an Examination .01- .04

Engagement Letter .01- .01P

Representation Letter .02- .04

17 The Practitioner’s Examination Report .01- .28

Modifications to the Practitioner’s Opinion .06- .15

Other Modifications to the Standard Examination Report .16- .28

Reporting on a Financial Forecast That Includes a Projected Sale of an Entity’s Real Estate Investment at the End of the Forecast Period .20

Reporting If the Financial Forecast Includes Disclosures About Periods Beyond the Forecast Period .21- .22

Reporting on Information Accompanying a Financial Forecast in a Practitioner-Submitted Document .23- .25

Reporting If the Examination Is Part of a Larger Engagement .26- .27

Lack of Independence .28

18 Considerations for the Practitioner Reporting on an Examination of a Financial Forecast Contained in a Public Offering Statement .01- .10

Procedures Between the Date of the Practitioner’s Report and Effective Date in 1933 Act Filings .02- .05

The Practitioner’s Consent .06- .08

Experts Section of 1933 Act Filings .09

Description of Additional Procedures and

Comfort Letters .10

19 Application of Agreed-Upon Procedures .01- .29

Engagement Letter .05

Procedures to Be Performed .06- .10

Documentation .11- .18

Representation Letter .19- .20

Involvement of a Specialist .21- .23

Adding Parties as Specified Parties (Nonparticipant Parties) .24

Change to an Agreed-Upon Procedures Engagement From Another Form of Engagement .25- .29

20 Illustrative Engagement and Representation Letters for Agreed-Upon Procedures Engagements .01- .04

Engagement Letter .01- .01P

Representation Letter .02- .04

21 The Practitioner’s Report on the Results of Applying Agreed-Upon Procedures .01- .09

Findings .02- .05

Explanatory Language .06

Dating of Report .07

Restrictions on the Performance of Procedures .08

Knowledge of Matters Outside Agreed-Upon Procedures.09

22 Guidance on the Practitioner’s Services and Reports on Prospective Financial Statements for Internal Use Only .01- 09

Procedures .03- .04

Reporting .05- .09

Part 4 Guidance for Practitioners Who Provide Services on Partial Presentations of Prospective Financial Information

23 Partial Presentations of Prospective Financial Information .01- .24

Uses of Partial Presentations .03- .04

Preparation and Presentation of Partial Presentations .05- .15P Practitioner’s Involvement With Partial Presentations .16- .24

Compilation and Examination Procedures .20

Applying Agreed- Upon Procedures to Partial Presentations .21

Standard Practitioner’s Compilation, Examination, and Agreed-Upon Procedures Reports .22- .24

Appendix

A SEC Policy on Projections

B SEC Safe Harbor Rule for Projections

C IRS Regulations Regarding Tax Shelter Opinions (Circular 230) D Private Securities Litigation Reform Act of 1995

E Schedule of Changes Made to the Text From the Previous Edition

Index

Founded in 1887, the American Institute of Certified Public Accountants (AICPA) represents the CPA and accounting profession nationally and globally regarding rule-making and standard-setting, and serves as an advocate before legislative bodies, public interest groups and other professional organizations. The AICPA develops standards for audits of private companies and other services by CPAs; provides educational guidance materials to its members; develops and grades the Uniform CPA Examination; and monitors and enforces compliance with the accounting profession’s technical and ethical standards.

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