pro forma financial statement

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Pro Forma Financial Statement

A financial statement that a company prepares to consider the effects of a potential activity. For example, if a company is considering acquiring another, it may prepare a pro forma financial statement to estimate what effect the acquisition would have on its own financial circumstances. A pro forma financial statement can be part of the risk analysis of a situation. See also: Due diligence.

pro forma financial statement

A financial statement constructed from projected amounts. A firm might construct a pro forma income statement based on projected revenues and costs for the following year. Likewise, a firm may wish to develop a set of pro forma statements to determine the effect of a projected stock buyback.
References in periodicals archive ?
Respondents did perceive some value in pro forma statements in terms of providing relevant and timely information and in having predictive value and feedback value.
Pro forma statements ("If most expenses are ignored or capitalized as customer database development, operations will appear marginally profitable, so buy our stock").
The FASB also plans a project on reporting financial performance, though Lucas said he saw little relationship between the project and the controversy over pro forma statements.
However, pro forma statements are not audited and may not even be reconcilable with financial statements filed with the commission.
Prior years' financial statements are generally not altered, but pro forma statements are issued to show how the statements would have looked if the new method had been used.
Consider the remarks of SEC Chair Harvey Pitt: "I would say in cases where pro forma statements change a loss into a profit, my view is there is an almost 100% chance that a company that is capable of doing that without appropriate disclosure will have defrauded or confused its investors.
Recently you expressed your view on pro forma statements ("Let's Be Balanced With Pro Forma Earnings," From the President, June 2001).