In business, pro forma financial statements are prepared in advance of a planned transaction, such as a merger, an acquisition, a new capital investment, or a change in capital structure such as incurrence of new debt or issuance of stock. Securities and Exchange Commission requires publicly traded companies in the United States to report US GAAP-based financial results, and has cautioned companies that using pro forma results to obscure US GAAP results would be considered fraud if used to mislead investors.īusiness Financial statements įurther information: Financial modeling § Accounting There was a boom in the reporting of pro forma results in the US starting in the late 1990s, with many dot-com companies using the technique to recast their losses as profits, or at least to show smaller losses than the US GAAP accounting showed. Examples of expenses often excluded from pro forma results are company restructuring costs, a decline in the value of the company's investments, or other accounting charges, such as adjusting the current balance sheet to fix faulty accounting practices in previous years. The pro forma accounting is a statement of the company's financial activities while excluding "unusual and nonrecurring transactions" when stating how much money the company actually made. JSTOR ( September 2008) ( Learn how and when to remove this template message).Unsourced material may be challenged and removed. Please help improve this article by adding citations to reliable sources. This article needs additional citations for verification.
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