Page 221 - AAA Integrated Workbook STUDENT S18-J19

Prospective financial information

Prospective financial information

1.1 Definitions

Prospective financial information (PFI)

Financial information based on assumptions about events that may
occur in the future and possible actions by an entity. It may be in the
form of a forecast or a projection, or a combination of both.

Forecast

PFI prepared on the basis of assumptions as to future events that
management expects to take place and the actions management
expects to take (best-estimate assumptions).

Projection

PFI prepared on the basis of hypothetical assumptions about future
events and management actions that are not necessarily expected to
take place, or a mixture of best estimate and hypothetical assumptions.

1.2 Purpose

The forecast may be used by a bank or other provider of finance to support a loan
application. An assurance provider may be asked to provide an assurance report to
enhance the credibility of the information and reduce the risk to the user.

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