Page 29 - Calculating Lost Profits

Loss period end dates are also a common point of disagreement because the dates often occur in the fu-
ture and are based on facts and circumstances on which the parties may not agree, such as forecasts of
how the business will perform in the future and how long it will be until the business will "catch up" to
the but-for performance. In this context, it is possible for a wrongful act to permanently impair a busi-
ness. Given the nature of determining the loss period, it is often the role of the practitioner to assist the
trier of fact in understanding the loss period and why the selected loss period is appropriate. Items and
information that may be relevant in determining the end of the loss period may include the following:

 The date that the injured party is made whole

 The date when the wrongful act ended

 The date or period at or during which the but-for sales are equal to the forecasted actual sales

 The date of a termination provision in a contract

 The required notice period in a contract

 Any renewal provisions in a contract

 The date of trial

 The dates of any relevant injunctions or other court decisions

 Court filings such as pleadings, answers, and rulings by the court

 Interrogatory responses, deposition testimony, or admissions

 If the business survived

 If the business will be able or can be reasonably expected to fully recover

 The historical operations of the business

 Relevant industry data such as the average lifespan of the type of business at issue

 Laches and statute of limitations issues

 Case law specific to the case’s jurisdiction

 Discussions with the client and counsel

Another key factor that affects the determination of the loss period is the type of case. For example, as
discussed further in the following text, a loss period for breach of contract matters may differ signifi-
cantly with a loss period for tort matters.

Breach of Contract

In a breach of contract action, the loss period may be a period less than the contract’s term, extend over
the remaining term of the contract, or go beyond the contract term (for example, include expected re-

© 2020 Association of International Certified Professional Accountants 27