What is Economic Damage Quantification?
Economic damages are damages that usually involve loss of profits, loss of wages and earnings (past and future), loss of future earning capacity, damage to real and personal property and loss of value. Economic damage quantification is the measurement of these damages which often result from a harmful act. There are many events that can result in economic damages for an individual or business, for example, damages caused to the environment, catastrophes such as 9/11, fraud, personal injury or wrongful death or other economic factors.
Who performs an Economic Damage Quantification?
For many years, insurance companies, lawyers, adjusters, government agencies and businesses have turned to forensic accounting firms like MDD Forensic Accountants to assist with economic damage quantification.
Forensic accountants have the professional training, experience and expertise to perform the assessments and calculations, no matter how challenging they might be.
Forensic accountants such as MDD are able to quantify economic losses across a wide range of areas including insurance claims, fraud and embezzlement, personal injury, business disputes, business interruption, divorce and marital disputes, construction defects, environmental damages, cyber-crime, product liability, patent and copyright infringement and more.
How are Economic Damages quantified?
Forensic accountants use the latest statistical and econometric tools, publications and opinions from industry leaders to arrive at fair and reasonable calculations of loss and damage.
There are several approaches that are utilized when quantifying economic damages, a few examples are shown:
- Benchmark Approach – The performance of the company or individual is compared to other companies or individuals that are similar in nature. This gives the forensic accountant a guideline as to how the company or individual would have performed had no harmful act occurred.
- Before and After Method – The performance prior to the harmful act is compared to the performance after. In some instances, a forensic accountant may be called on to determine whether or not the company or individual actually benefited from the wrongdoing.
- Underlying Contract – Damages are calculated in accordance with underlying contracts in place at the time of the harmful act.
- Defendant’s Profits – In cases involving unfair competition or misappropriation of trade secrets, an accounting of the profits realized by the defendant may be used as a measure of the plaintiff’s lost profits.
Quantifying economic damage requires specialized skills, expertise and a wealth of experience and knowledge.
With forensic accounting professionals in over 40 offices on 5 continents, MDD has unparalleled global resources to assist our clients in quantifying damages across a wide range of areas, including business interruption, fraud, personal injury, product liability, marital disputes and environmental damages. Since 1933, we have provided unsurpassed expertise in over 800 industries.
Our forensic accounting professionals are exceptionally dedicated and qualified experts with proven track records who provide economic damage assessments that stand up to scrutiny.
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