Lost Profits Methodologies

Methodology/Approach

1. Before-and-After1

A. "Would Have Been" Based on actual results before and/or after alleged event(s)

B. Actual

C. Damage (C = A - B)

2. Yardstick1

A. Unaffected similar company, industry or market

B. Actual

C. Damage (C = A - B) 

3. Sales Projections

(Hypothetical Profits)1

A. "Would Have Been" Based on business plans and projections

B. Actual

C. Damage (C = A - B)

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:

A. 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.

B. 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.

C. 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

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 

Applied Methodology and Principles

To gather and obtain facts, information, documents and other sufficient relevant evidence seen in our reports and addendums, our fact finding work includes:

• Analyses

• Averaging

• Calculations

• Comparisons

• Computations

• Evaluations

• Examinations

• Findings

• Graphics

• Interviews

• Other Fact Finding Skills

• Professional Judgment

• Proformas

• Research

• Reviews

• Spreadsheets

• Studies

• Testings

• Testimony

• Variance Explanations

• Verifications

• Among others