Forward-Looking Statements


The term forward-looking statement refers to predictions made in written materials that reference the future business or operating performance of a company.  Forward-looking statements must be clearly identified by companies when communicating; allowing investors to easily distinguish between facts and speculation.


Rules under the jurisdiction of the Securities and Exchange Commission require companies to comply with certain standards of communication.  These rules were put into place to allow investors to clearly understand when a published report or statement made by a company was based on historical records or a forecast of future performance.

Companies will usually include a note indicating a report contains forward-looking statements near the beginning of any publically-released information.  These statements will frequently reference anticipated growth rates of net income, earnings, as well as the company's future investment opportunities.

Companies will normally include a statement as part of its annual report or Form 10-K.  The statement itself will oftentimes contain language similar to the below:

"Matters discussed in this communication about future performance, including revenues, earnings, strategies, and prospects that are not based on historical information constitute "forward-looking statements" within the meaning outlined in the Private Securities Litigation Reform Act of 1995.  A forward-looking statement is subject to certain risks and uncertainties, which may cause the company's actual results to differ materially from those appearing in this report."

The document will also provide the reader with insights into how to identify instances where a forward-looking statement is being made in the report.  For example, it may indicate words such as "anticipate," "intend," "forecast," "estimate," "may," "expect," "plan," "could," "potential," "project," "propose," can be used to identify a forward-looking statement.

These statements not only allow investors to make prudent decisions, but also provide protection to those entities making such statements.  For example, a company may make a forward-looking statement about future earnings.  If the company does not deliver those earnings to investors, it's protected from legal action since it's identified the uncertainty and risk associated with such forecasts.

Related Terms

Form 10-K, Form 10-Q, Form 8-Kproxy statement, annual report, financial highlightssafe harbor, management's discussion and analysis, critical accounting estimates