Pro Forma: What It Means and How to Create Pro Forma Financial Statements
Posted: Tue Aug 01, 2023 6:58 pm
Pro Forma: What It Means and How to Create Pro Forma Financial Statements
https://www.investopedia.com/terms/p/proforma.asp
What Is Pro Forma?
Pro forma means “for the sake of form” or “as a matter of form." When it appears in financial statements, it indicates that a method of calculating financial results using certain projections or presumptions has been used.
Pro forma financials are not computed using generally accepted accounting principles (GAAP) and usually leave out one-time expenses that are not part of normal company operations, such as restructuring costs following a merger.
Essentially, a pro forma financial statement can exclude anything a company believes obscures the accuracy of its financial outlook and can be a useful piece of information to help assess a company's future prospects.
KEY TAKEAWAYS
Pro forma, Latin for “as a matter of form” or “for the sake of form”, is a method of calculating financial results using certain projections or presumptions.
Pro forma financials may not be GAAP compliant but can be issued to the public to highlight certain items for potential investors.
They can also be used internally by management for aiding in business decisions.
It's illegal for publicly traded companies to mislead investors with pro forma financial results that do not use the most conservative possible estimates of revenue and expense.
https://www.investopedia.com/terms/p/proforma.asp
What Is Pro Forma?
Pro forma means “for the sake of form” or “as a matter of form." When it appears in financial statements, it indicates that a method of calculating financial results using certain projections or presumptions has been used.
Pro forma financials are not computed using generally accepted accounting principles (GAAP) and usually leave out one-time expenses that are not part of normal company operations, such as restructuring costs following a merger.
Essentially, a pro forma financial statement can exclude anything a company believes obscures the accuracy of its financial outlook and can be a useful piece of information to help assess a company's future prospects.
KEY TAKEAWAYS
Pro forma, Latin for “as a matter of form” or “for the sake of form”, is a method of calculating financial results using certain projections or presumptions.
Pro forma financials may not be GAAP compliant but can be issued to the public to highlight certain items for potential investors.
They can also be used internally by management for aiding in business decisions.
It's illegal for publicly traded companies to mislead investors with pro forma financial results that do not use the most conservative possible estimates of revenue and expense.