On Tuesday 13 November, ICAEW announced the launch of their Financial Modelling Code report – a guide designed to help drive decision-making throughout the business world. This has been inspired by the fact that there is still no universally accepted set of agreed principles for best practice.
According to their statement, “ICAEW’S Excel Community provides essential practical guidance on universal tenets of best practice in the field to minimise spreadsheet risk.”
The guide has aimed to capture the main guidelines for correct and cohesive financial modelling, involving spreadsheet creation to help build strong models and reduce the number of potential errors.
When compiling this report, ICAEW analysed seven organisations’ modelling standards, as well as taking on the input of over a dozen professional services organisations.
ICAEW’s technical manager, David Lyford-Smith, said: “There are various courses, standards, and guides available that explain how to build models, each with their own ideas about what the appearance, layout, and functionality of a model should be. Whilst there is much consensus among these methodologies, for both procurers and practitioners, there is no universally accepted set of agreed principles for how to carry out financial modelling. Most existing methodologies were developed with particular sectors or practices in mind; hence, they are frequently detail-oriented and not accepted very widely.
“Improper practice such as incoherent methods, or lack of review and oversight, negatively impacts the world economy. This guide was created to support best practice in creating financial models that are robust, understandable, and less likely to contain errors. Each section of the Code addresses a particular element of constructing a model presenting specific recommendations, including several options, representing generally suitable and wisely adopted approaches.”
Neil Rutledge, director at Amberside Advisors Ltd, concluded: “Amberside Advisors are proud to be involved with the development and publications of the ICAEW’s Financial Modelling Code.
“This achievement follows on from the recognition by ICAEW of Amberside’s own financial modelling standard earlier this year.”
To read the full report, click here.