Basic Assumptions - Corporate Component

It is important that you are aware of the assumptions Snap Projections uses in its internal calculation engine for the Corporate Module. This will help you gain a better understanding of the calculations and be able to assess the impact of these assumptions on long-term projections for the corporation.

1. Values that you enter for corporate Financial Assets, Real Assets, and Debt balances are considered start-of-year values for the first year of the projection. Asset growth is calculated annually. 
   • Note: For scenarios created later in the year you may not wish the Corporate Assets to accumulate an entire year's worth of growth in a few months.  In this case, you can start the projections in January of the next year so that the values you enter will be the start value for January 1 of the next year. 
2. The Financial Asset Value, Real Asset Value, Debt Amount Owing, and Net Worth values on the Planning Page and in the Client Report are the year-end values (as of December 31 at 11:59 pm).
3. If there are multiple assets listed as part of the Corporate Assets: 
   • any surplus in the year is split and added to the Financial Assets proportionally (based on account values) by default. 
   • assets are withdrawn from the Financial Assets proportionally (based on account values) by default.
   • you can change the default option for proportional contributions and withdrawals to a sequential order on the personal planning page by adjusting the CFM Method settings (click the gear icon in the heading for Financial Assets.)
4. Withdrawals from Financial Assets are made at the beginning of the year (this is the most conservative scenario since it is typically difficult to determine when they will occur).
   • Note: This setting currently cannot be changed.
   • Taxes are considered to be paid at the beginning of the year.  Dividend tax credits are applied in the year following the dividend payout.
   • Salaries, expenses, and dividends are paid out at the beginning of the year as well.
5. Contributions are made at the end of the year.
   • Note: This setting currently cannot be changed.
   • Operating Income and Other Income are considered to be contributed to the corporate Financial Assets at the end of the year.
6. Financial Asset growth is calculated annually. 
7. Real Asset growth is calculated annually (but is pro-rated daily if an asset is bought/sold throughout the year).
8. The interest rate on all Debts is nominal and compounded monthly.

Note: For information on the assumptions made in Snap related to the corporate disposition on death, please refer to the Corporate Disposition on Death article and the Estate Summary article.

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Here is a simple example to demonstrate the calculation of the Net Worth end-of-year value. There is one corporate Financial Asset with a beginning-of-year value of $1MM. No active business income or expenses, no dividends paid out.

Calculation: 

Corporate Asset value on Jan 1, 2024 = $1MM. 

Corporate Income Tax is calculated as $27,239. (Based on an iterative process, Snap can run multiple simulations to predict upfront the tax payable for the year and set this amount aside to pay the tax.  The residual will then be deployed for investments.)

The new start-of-year Capital Balance is calculated as $1MM - $27,239 = $972,761.

Based on this principal amount of $972,761 and a 6% rate of return on investments, $58,366 is the investment income for the year, which results in $27,239 in taxes payable on this investment income. This amount ends up being the same as the amount that was set aside to pay the taxes at the beginning of the year. The Financial Asset Value at the end of the year is $1,031,126. This is also equal to the Corporate Net Worth since no Real Assets, Insurance CSV or Debts have been entered.

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