Pro-forma Financial Statements
Professionally prepared pro-forma financial statements have attained a prominent role in today's financial world as company takeovers, mergers and acquisitions occur with greater frequency and equity issues attain greater complexity.
Pro-forma financial statements are historical statements that have been remade to illustrate the effect of a proposed transaction, such as a business combination, acquisition, or proposed issue of securities.
The role of a pro-forma balance sheet is to present underlying assumptions and events that permit investors to understand the potential effect of that proposed transaction.
A pro-forma combined statement of earnings should be also presented, where meaningful results can be determined, such as the potential effect of a business combination on the companies' combined earnings.
Any effect on future earnings of the combined company which can't be included in the statements themselves should be separately disclosed in a note to the pro-forma earnings statement.
Pro forma financial statements can also be presented to illustrate the effect of transactions which occur subsequent to the balance sheet date.