Loss of profit report: technical and expert quantification of losses
A loss of earnings report is a technical document that quantifies the economic benefits foregone by a person or company as a result of a damaging event, such as an accident, breach of contract, stoppage of activity or expropriation. Its purpose is to serve as objective and defensible evidence in claims, litigation or negotiations, providing rigour in the estimation of future losses and offering a solid basis for claiming compensation or making strategic decisions.
We are a leading company with more than 30 years of experience in advising companies and individuals in the following areas Consultancy, Valuation and Appraisal. To have the backing of an independent firm such as Gesvalt,approved by the Bank of Spain, in the preparation of loss of earnings reports guarantees technical rigour, objectivity and legal validity. Our opinions provide the necessary confidence to defend interests in judicial or extrajudicial proceedings, resolve economic disputes and support strategic decisions in claim or negotiation contexts.
What is a loss of earnings report and when is it needed?
Legal definition of loss of profit
The loss of earnings, is the economic loss of income that would reasonably have been earned if a harmful event had not occurred. In Spanish law it is recognised under civil liability as a right to be compensated for future frustrated profits.
Difference between consequential damage and loss of profits
The consequential damage refers to the direct loss of assets, such as expenses incurred or necessary repairs. The loss of earnings,instead, it focuses on the foregone gain, i.e. the income that the person concerned ceased to generate. Both concepts are assessed together to calculate the actual extent of the compensation.
Typical cases: accidents, non-compliance, stoppage of activity, expropriations
A loss of earnings report is essential in situations where future economic losses have to be proven: work or traffic accidents, breach of contract, company stoppage due to external causes or expropriation processes. Having an independent study such as that of Gesvalt, provides credibility, objectivity and substantiated calculations that can stand up in negotiations, litigation or before regulatory bodies.
What should a technical report on loss of profit include?
The documentation of a loss of profit report should first of all include the purpose and scope of the analysis, clearly stating the circumstances that motivate it. It should then detail the assessment process followed, explaining the methodology used. The report shall include the calculation of the loss of earnings during the months or years of inactivity,as well as the costs arising and incurred in that period. Subsequently, the quantification of loss of profit,where the resulting economic estimates are presented. Finally, the document should close with the results and conclusions,the report provides a comprehensive and well-founded overview of the economic impact suffered.
Identification of injury and cause-effect relationship
A loss of earnings report begins with the clear identification of the event giving rise to the damage and the description of the harm suffered. It is essential to establish a direct link between the cause (accident, non-performance, paralysis or expropriation) and the economic loss claimed, in order for the claim to be solid and defensible.
Calculation of revenue foregone
The report must quantify in detail the income that the person or entity ceased to earn. This is done by analysing contracts, balance sheets, business projections and any other economic evidence that objectively demonstrates the frustrated profit.
Estimation based on historical, market and comparable scenarios
The valuation is not limited to accounting but is based on historical business performance, market trends and comparable scenarios that allow for a rigorous projection of the revenues that would have been generated under normal conditions. This approach avoids arbitrary estimates and provides technical credibility.
Methodology and technical justification
Finally, the loss of profit report must explain the methodology used, the assumptions considered and the technical justification for each calculation. A document prepared with these criteria by an independent consultancy firm such as Gesvalt ensures objectivity, transparency and validity before courts, insurers or auditors.
Why trust Gesvalt for the preparation of reports for loss of profit?
Defensible expert reports before courts, insurers and arbitrators
At Gesvalt we draw up reports on loss of earnings with technical and legal validity, capable of being upheld in legal proceedings, insurance claims or arbitration procedures, providing credibility and security to the client.
Multidisciplinary teams
Our reports are drawn up by expert experts and a multidisciplinary team with extensive experience in the drafting of expert opinions and loss of profit reports that guarantee a comprehensive and objective analysis in each case.
Experience in key sectors: retail, industry, real estate, hospitality, etc.
We have more than 30 years of experience in strategic sectors such as retail, industry, real estate and hospitality, which allows us to apply specific methodologies and provide accurate and defensible estimates in each context.
Types of loss of earnings reports depending on the context
These reports, based on recognised methodologies and defensible technical criteria, are essential for legal claims, negotiation processes or auditing.
Loss of profit due to accidents or stoppage of activity
Loss of profit reports for claims quantify the profits that a company loses due to the temporary interruption of its activity, whether due to an accident, a fire, a breakdown or a natural disaster. They can be used to substantiate claims against insurers or liable third parties.
Expert reports on breaches of contract
In situations where one of the parties breaches a contract, a loss of earnings report proves the frustrated profits derived from that non-performance. This analysis is essential in commercial and civil litigation to support economic claims on an objective basis.
Losses arising from expropriation, works or easements
When an expropriation, an easement or the execution of public works limits or prevents the activity of a business, the technical report calculates the benefits not generated. In this way, the corresponding compensation is supported by verifiable criteria.
Reports for loss of profit in inheritance or dissolution of a company
This type of report provides transparency and rigour in the distribution of assets and in decision-making. In processes of inheritances, partitions or dissolutions of companies,the calculation of lost profits helps to estimate the income that certain assets or businesses will cease to produce.
Gesvalt's methodology for estimating loss of profits
Our experts have extensive experience in drafting loss of profit reports using the most objective and detailed methodology.
Historical-accounting analysis and revenue projection
At Gesvalt we start with a detailed study of the financial and accounting information available, evaluating past results and their evolution. Based on this data, we project the income that would reasonably have been obtained if the damaging event had not occurred.
Market valuation, benchmarking and alternative scenarios
The estimate is checked against market benchmarks, sectoral analysis and relevant comparables. This benchmarking approach allows to validate assumptions and to develop alternative scenarios that strengthen the consistency of the report.
Economic-financial modelling and validation by independent expert
Finally, we apply advanced economic-financial models that quantify the loss of profit in an objective and defensible manner. Review by an independent expert guarantees transparency, technical soundness and the usefulness of the report in legal proceedings, claims or negotiations.
Frequently asked questions on loss of earnings reports
What is the difference between a loss of profit report and an expert report?
What is the difference between a loss of profit report and an expert report?
The loss of earnings report calculates the foregone profits, while the expert's report provides a broader technical assessment.
Is a private loss of profit report legally valid?
Is a private loss of profit report legally valid?
Yes, a private loss of profit report is valid as documentary evidence and can be reinforced if it is drawn up by an independent accredited expert such as Gesvalt.
What documentation do I need to provide for its preparation?
What documentation do I need to provide for its preparation?
It is required to provide accounting information, contracts, balance sheets, income history and supporting documentation that allows an objective projection of the financial loss.
Can Gesvalt act as an expert witness in court?
Can Gesvalt act as an expert witness in court?
Yes, Gesvalt has qualified experts who can draw up the report and act as expert witnesses in court, defending their conclusions with rigour and technical solvency.