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JANIK PC
CPA, Business
& Forensic Consulting Firm
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Examples
of Lost Profits Methodologies
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Methodology/Approach |
Examples |
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Before-and-After1 |
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"Would Have Been" based on
before/after |
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| Yardstick1 |
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Unaffected similar company, industry or market |
| 1 |
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Sales
Projections
(Hypothetical Profits)1 |
"Would
Have
Been"
Performance |
| 1 |
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The CPA can suggest several
different ways to prove facts or make points, such as using the following
three common methods to compute lost profits:
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Before-and-after approach. The CPA uses the periods before or
after the period of the alleged violation or both periods to estimate
what the plaintiff's performance would have been during the period of
the alleged violation. |
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Yardstick
approach. The CPA studies a similar company, industry, or
market that was unaffected by the alleged violation in order to estimate
what the plaintiff's performance should have been during the period of
the alleged violation. |
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Sales projections
(hypothetical profits). The CPA creates a model of the
impacted business by making assumptions based on how the plaintiff would
have performed but for the alleged violation.1 |
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1
Source AICPA (American Institute of Certified Public Accountants)
Consulting Services Practice Aid 93-4; Providing Litigation Services;
Peter B. Frank, CPA and Michael J. Wagner, CPA, JD; 1993 |
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