Lost profits calculations can be a very tricky proposition and are not to be entered into lightly. When presented with such a challenge, it may seem fairly simple and straightforward — net income before the incident compared to net income after the incident equals lost profits, right? But there’s a lot more to it.
According to the American Institute of Certified Public Accountants’ “Practice Aid 06-4, Calculating Lost Profits,” some of the things a practitioner must consider when performing a lost profits analysis are loss causation, appropriate method, saved expenses, loss period and mitigation.
Loss Causation/Proximate Cause
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