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In question September 2018 Q3(a), (in the procedures to be performed for forecast)
in the answer sheet, it says we also include
– recalculate the depreciation of new HGVs and warehousing forecast which the firm will finance through new loan financing and;
– recalculation of new finance cost from new loanThese are all assumptions which the loan and financing of planned expansion have not occurred yet. The question only says they will apply for the new loan but the procedures like new depreciation of new HGVs and new finance cost from new loan assume they will get the loan. What if they fail to get the loan ? then those procedures will be not appropriate and incorrect isn’t ?
What can I say? The forecast is based on assumptions and you have to recommend the procedures to be performed on that forecast. You can’t just dismiss it and say because it may not happen there are no procedures to be performed.
That means we can write any context related procedures that may or may not occur in the future but within reasonable boundary ?
You wrote “we can write any context related PROCEDURES that may or may not occur in the FUTURE” – I am saying that the procedures are not in the future, but NOW.
So, for example, if taken out the loan will have FUTURE interest – the profit/cash flow forecast will include interest expense/payments due. The professional accountant can confirm the reasonableness of these amounts by recalculating them NOW.
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