Technology
Reading financial performance in its business context.
The financial context
Revenue models, development expenditure and assumptions about future trading can materially affect financial analysis. A useful assessment explains how those factors relate to the question being considered.
Questions that shape the review
How is revenue generated and recorded?
Understand the business model, timing of recognition and the relationship between reported revenue and cash.
Which expectations drive the assessment?
Examine forecasts, development expenditure and material assumptions in their business context.
From information to an explanation
The work should connect the source material to the question being considered. Differences in definitions, periods or assumptions need to be made visible, together with the effect of any missing records.
The resulting explanation should distinguish what is documented, what depends on judgement and what remains uncertain. Its form and level of detail depend on the agreed purpose.
A question of suitability
The practice’s relevant experience, independence and the information available must be confirmed before any engagement. The purpose, scope and reporting requirements are agreed before analysis begins.
Discuss the financial question.
Start with the background, the relevant period and what you need to understand.
Discuss an enquiry