External Use
Projected financial statements are often requested by external financial statement users. Lenders, potential investors, and others have a keen interest in such information. While these documents are very common and heavily used for internal planning purposes, great care must be taken in allowing them to be viewed by persons outside of the entity.
The accountant who is involved with external use reports has a duty to utilize appropriate care in preparing them; there must be a reasonable basis for the underlying assumptions. In addition, professional standards dictate the reporting that must accompany such reports if they are to be released for external use. Those reporting standards become fairly complex, and the specifics will depend on the nature of external use. But, those reports will necessarily include language that makes it very clear that the participating accountant is not vouching for their achievability.
Managers must also be careful in external communications of forward-looking information. USA securities laws can hold managers accountable if they fail to include appropriate cautionary language to accompany forward-looking comments, and the comments are later shown to be faulty. In addition, other regulations (Reg FD) may require "full disclosure" to everyone when such information is made available to anyone. As a result, many managers are reticent to make any forward-looking statements. It is no wonder that many budgetary documents are emblazoned "internal use only."
Source: principlesofaccounting.com, Larry M. Walther, Copyright 2016.
Activity
Please complete the following activity. There is only one set to be answered.
![]() |
Select the correct items. Click the bottom right arrow to go to the next set. Click the checkmark (available on the last set) to submit all your answers. |
This content requires JavaScript enabled.
|