“We appraisers love our terms of art,” writes Rod Burkert (Burkert Valuation Advisors), but what you don’t know about the nuances of a particular term may get you into trouble, especially when preparing valuations in litigation contexts. Take the fine distinction between a “forecast” and a “projection” (for which none of the BV professional standards or even the International Glossary of BV Terms provides an express definition). “Sometimes the two words are used interchangeably in a [DCF] report—in one paragraph it’s a projection, in the next it’s a forecast,” Burkert says. “And sometimes I see the more mangled expressions of ‘projected forecast’ or ‘forecasted projection.’”

What’s the correct usage? “I believe it is fair to say that a forecast is what is expected to happen while a projection is what might happen given certain hypothetical assumptions,” Burkert explains. “From a CPA attestation perspective, you can examine a forecast, but only compile a projection.” Read Burkert’s complete discussion of the terms, their nuances and correct applications, in his new article, “When Is a ‘Projection’ a ‘Forecast’?” in the current (February 2012) Business Valuation Update.