Forward Looking (Accounting) - Explained
What is Forward Looking?
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What is Forward Looking?
Forward looking refers to a business terminology that makes predictions about prospective business conditions. This term is mostly used when stockholders of the company such as shareholders keep asking its executives or managers regarding its future conditions so that they can place bids in an according manner. Though future cannot be clearly predicted, but still, the management of the firm tries to feasibly outline the organizational plans in the coming months, and how such predictions would align with the existing scenario.
Back to: ACCOUNTING, TAX, & REPORTING
How does Forward Looking Work?
There are many firms that release disclaimers regarding their forward looking declarations. In spite of a basic know-how that specific statements or declarations are mere speculations, the Securities and Exchange Commission (SEC) ask public organizations to provide with disclaimer on issued management meetings made with investors. If any forward looking statement that the company issued, proves to be false or wrong, the investors are not allowed to take any legal step against the company. The Private Securities Litigation Reform Act of 1995 offers safe practices to save companies and investors from false claims associated with forward looking discussions. The Private Securities Litigation Reform Act asks victims to present any particular false declaration statements that the defending party has made. This step was taken for safeguarding the financial interests of victim, and save him or her from purposely-made misleading statements.
Example of a Forward Looking Statement Disclaimer
For example: General Electric posts a forward looking statement disclaimer under the investor relations tab on its official website. It mentions that it is possible for the public communications and Securities Exchange Commission related information to include forward looking statements which may provide insights about the prospective operations and financial performance of the company. Forward looking statements are unpredictable in nature when it comes to assessing future conditions of the business. The managerial staff of the company can predict about the revenues, cash flows, financial performance, earnings per share, and growth of the company, but it is not necessary that those estimates will appear to be true. Managements comments on exclusive policies and U.S. tax policies should not be considered to be true. There are many claims made by the company in forward looking statements that might not hold true in the future. However, they give an idea to the public about how managerial team is observing and analyzing the organizational environment, the position of the organization in that environment, and its objectives for growing and expanding its business in future.
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