We use either Simple Exponential Smoothing or the adjusted Holt-Winters Exponential Smoothing algorithm to generate the expected values used in Analytical Procedures. See below for a break down of each algorithm:
Simple Exponential Smoothing is used when an account is to be predicted as a function of its historical values, and the account is not expected to exhibit any consistent upward or downward trends. For example, the gross fixed assets account is predicted using this method.
Adjusted Holt-Winters Exponential Smoothing is used when an account is to be predicted as a function of its historical values, and a trend IS expected. For example, the sales account is predicted using this method as opposed to Simple Exponential Smoothing because historical movements in sales are expected to provide information about the current level of sales.