Forecast and projection
A forecast is prospective financial information prepared on assumptions about future events management expects and actions it expects to take. A projection uses hypothetical assumptions, often alongside best-estimate assumptions, to illustrate possible consequences rather than necessarily the most likely outcome. The assumptions and their basis should be clear.
Worked example
Management forecasts next year’s sales using expected demand, and separately projects the effect of opening a branch that may never be built.
Common mistake
Do not present a hypothetical projection as a prediction that the underlying events will occur.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Direct | September 2026–June 2027 |