Pro Forma Financial Statements
IntermediatePro forma financial statements are financial statements prepared to show how a company's results or position would have looked if a particular event, such as an acquisition or financing, had happened at an earlier date.
"Pro forma" means "as a matter of form". These statements adjust actual or forecast figures to illustrate the effect of a specific transaction or change.
For example, if a company completes a large acquisition halfway through the year, its reported results include the acquired business only for the second half. Pro forma statements might show the combined results as if the acquisition had happened at the start of the year, helping investors understand the size of the enlarged group.
Pro forma statements are also used when a company plans to raise money, restructure, go public or spin off a division, and in business plans to show expected results under certain assumptions.
They can be useful, but they are hypothetical. They depend on the assumptions and adjustments chosen by the company, which may not be audited in the same way as historical statements.
The term is also sometimes used for adjusted profit figures that exclude certain costs. These should be read carefully, because companies may remove expenses that are, in reality, ongoing. Regulators often require pro forma figures to be reconciled to standard accounting measures.
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