Sandilands Committee

The Sandilands Committee considered the case for cash flow forecasting and concluded:

'We doubt whether such a proposal is practicable, at least in the foreseeable future. Many companies by the nature of their business would find it difficult to forecast their cash requirements with sufficient accuracy. Moreover, the proposal would require companies to disclose forecasts of their future position which could be damaging to their prospects. In general, we do not think it reasonable or practicable to require predictions about future events to be disclosed as part of a company's published accounts . . . We doubt whether such a fundamental change would be acceptable to British companies at the present time.'

In making this statement, the Sandilands Committee revealed the attachment to sentiment which afflicts the question of financial reporting. Each sentence in the above paragraph is a denial of fundamental points which we have examined in this part. To assert that firms are unable to make sufficiently accurate forecasts of their cash requirements is to deny the usefulness and, indeed, existence of cash budgeting as a central tool of management. To proceed to assert, by implication, that firms do make cash forecasts but their disclosure would be damaging to their interest exposes the weakness of the first assertion, and is a plea for secrecy and for discrimination in information supply. The third assertion, that it would not be reasonable or practicable to require predictions to be disclosed, is a rejection of our basic premise-that the relevance of financial reports is to be found in information which allows predictions to be made about future events.


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Read on: Disadvantages of Publishing Company Forecasts

Disadvantages of publishing company forecasts

Numerous objections have been made to the proposition that forecasts should be published to investors. The four major objections are as follows:

(a) forecasts are uncertain and may mislead investors;

(b) forecasts may be manipulated by unscrupulous managers;

(c) forecasts are difficult to audit;

(d) forecasts made known to competitors may be harmful to the interests of the enterprise, and therefore to those of its investors.

(a) It is true, of course, that forecasts are uncertain. This uncertainty... see: Disadvantages of Publishing Company Forecasts