Pro forma financial information
Pro forma financial statements are financial reports issued by an entity, using assumptions or hypothetical conditions about events that may have occurred in the past or which may occur in the future. These statements are used to present a view of corporate results to outsiders, perhaps as part of an investment or lending proposal. A budget may also be considered a variation on pro forma financial statements since it presents the projected results of an organization during a future period based on certain assumptions. 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 specific projections or presumptions has been used[AccountingTools.]. Pro forma financials are not computed using generally accepted accounting principles (GAAP) and usually leave out one-time expenses that are not part of everyday 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 useful information to help assess a company's future prospects. Pro forma, Latin for “as a matter of form” or “for the sake of form,” is a method of calculating financial results using specific projections or presumptions. Pro forma financials may not be GAAP compliant but can be issued to the public to highlight specific items for potential investors. The management can also use them internally to aid 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 revenue and expense estimates. Pro Forma Budget Documents: A budget anticipates the inflow of projected revenues and the outflow of funds for a defined future period, usually a fiscal year. A budget is based on certain assumptions about future expenses and revenues. It considers past expenses and revenues and factors in the costs of the company's plans for the fiscal year.
Pro Forma Company Income Statements: A pro forma income statement uses the pro forma calculation method, mainly to draw the attention of potential investors to specific numbers when a company issues its quarterly earnings announcement. For example, a company will report its actual sales and expenses for the quarter that just passed and, in the same chart, will list its projections of these numbers for the current quarter. In this case, the company is projecting the future based on its knowledge of past sales and expenses and factoring in expected changes[Investopedia].
Pro forma financial statements definition. AccountingTools. Retrieved from: https://www.accountingtools.com/articles/what-are-pro-forma-financial-statements.html
Pro Forma: What It Means and How to Create Pro Forma Financial Statements. Investopedia. Retrieved from: https://www.investopedia.com/terms/p/proforma.asp