Pro Forma Definition

Pologeorgis (2012) stated that the diversity of accounting principle has an essential impact on the stock markets, corporate management, and financial reporting. He pointed that when people seeking for international capitals, varies of dissimilar accounting principles create discrepancies in their financial reporting. If people cannot understand the differences between IFRS and GAAP, they may have the chance to make the wrong decisions and loss money in the capital markets. Pologeorgis (2012) also mentioned that international investors have to relearn the new principal in order to be more familiar with the international standards. Based on above, there is a keen motivation for people to understand the differences and similarities of GAAP and IFRS. This research will show business people the main similarities and differences of GAAP and IFRS.

The purpose of this report is to look at the advantages and disadvantages that would occur if the United States were to switch their financial reporting standards from U.S GAAP

To achieve this goal, it prepares projected cash flow statement, balance sheet, and projected income statement. These projected financial statement are called pro forma. The Pro forma income statements provides a budget for the operation of the company. They can help to determine whether the expenses thatare expected to rise or fall. It can also be used to project the profit of the company. The pro forma financial statements are like the historical financial statements but now projecting the future.The Pro forma will help the Body Shop calculate its projected financial

Such an intense focus has been placed on quarterly earnings as an indication of a company’s success by everyone from analysts to executives that ethics have for the most part been thrown out the window, sacrificed to the all important number, i.e. earnings per share. This is the theory in Alex Berenson’s book “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America.” This number has become part of a game to be played, a figure to be manipulated – beat the number and Wall Street all but throws a parade, miss it and a company’s stock may be abandoned. Take into account the incentives that executives have to beat the number and one can find plenty of reasons to manage earnings.

Pro forma is similar in many ways to a historical income statement; however, it projects the future rather than tracking the past. I used the pro forma statements a lot in determining growth decisions to see what the financial effects would be in the future. In Quarter 4 they were very useful because I wanted to increase my sales force from 14 sales people to 24 sales people.

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

The standard statements focus on accounting income for the entire corporation, not cash flows, and the two can be quite different during any given accounting period. However, for valuation purposes we need to discount cash flows, not accounting income. Moreover, since many firms have a number of separate divisions, and since division managers should be compensated on their divisions' performance, not that of the entire firm, information that focuses on the divisions is needed. These factors have led to the development of information that

Generally accepted accounting principles (GAAP) allow companies wide latitude in the choice of accounting policies. After a firm chooses a set of accounting policies, current accounting rules permit changes from one alternative policy to another at the discretion of the management. Since reported accounting figures are widely used by a number of external parties, managers of firms have incentives to choose accounting policies in order to influence the behavior of these parties. A variety of managerial motives for

According to Siegel, R. & Yacht, C. (December 2009) Pro forma statements show: “Projected results for financial statements in the future, given assumptions about what will happen in the meantime.”

Pro forma is Latin for “as a matter of form” or “for the sake of form”, this term is applied to procedures or documents that are completed as a pure formality, routinely, or seek to satisfy the least requirements. These statements are prepared in advance of a planned transaction, such as acquisition, a merger, a new capital investment, or a change in capital structure. Furthermore, pro forma models the anticipated outcomes of the transaction, with particular importance on the projected cash flows, net revenues and taxes. Consequently, these statements summarize the projected future status of a company, based on the current financial statements. Pro forma statements can help a business minimize the risks associated with running a business. Also

6. A pro forma income statement analysis that includes a forecast of revenue for the coming year, major cost and expense categories, earnings, earnings per share, and dividends. Rely on your own forecast. Do not base your analysis on a sales or earnings forecast from a secondary source such as Value Line.

According to Boeing’s most recent published annual report, its consolidated financial statements are in conformity with U.S. GAAP. However, the company states “We supplement the reporting of their financial information determined under U.S. GAAP with certain non-GAAP financial information. The non-GAAP financial information presented excludes certain significant items that may not be indicative of, or are unrelated to, results from our ongoing business operations” (The Boeing Company Form 10K, 2015). Boeing believes that these non-GAAP measures provide investors with additional insight into the company’s ongoing business performance (The Boeing Company Form 10K, 2015).

The word pro forma is a Latin term meaning “as a matter of form”. Looking at its meaning in business, financial statements are a main focus. Business pro formas are prepared in advance of a planned transaction. The pro forma statement illustrates projected earnings if a company were to sell off parts of its operation, merge with another company, or beginning a new venture. When a performance statement is used a company is able to

We have constructed pro forma financial statements based on the sales-driven estimates and interest and tax fixed burdens. The key determining factors to the accuracy of these projections are the assumptions made about revenue growth and the sales-driven accounts like cost of goods sold, current assets (viz., inventory). Also, assumptions about the company’s capital budgeting

GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a