TABLE OF CONTENTS Apart from simple calculator-type models, which contain sequences of single calculations which are time-independent, most models will have some period of time under analysis, either as historical data or forecast assumptions. The first rule that applies is that the time periods must be consistent across each sheet (the same column has the same function on each sheet), and we should use the same time periods across each sheet. This is simple in concept, but in practice it can be difficult to apply, particularly in relation to producing the option for quarterly or annual reports. Another common problem is that the timing or duration of certain events is uncertain, with difficulties in writing dependent formulae. In the following section we will consider various techniques which help us work around some of the inherent difficulties in writing robust, time-dependent calculations.
One of the fundamental rules of models that involve more than one period is that each row should have only one formula, and this was briefly introduced, along with its corresponding audit check, in Chapter 2. Consider a discounted cash flow scenario in which we are considering investing in a new production facility. The investment will probably take place in the third and fourth quarters of this financial year. The accounting rule is that the new asset will not be depreciated until it is put into use, in the first quarter of the next financial year. We need not consider the depreciation treatment in detail, but we need to...
