Pro forma

Financial statements prepared on the basis of some assumed events and transactions that have not yet occurred are referred to as “pro forma” financial statements.  These statements have not been audited and are not prepared in accordance with generally accepted accounting principles.  It is important that the investor understand the assumptions underpinning a pro forma financial statement and question the basis for those assumptions. Investors should ask whether any third party has investigated those assumptions, and whether any accountant has “checked the math” (CPAs can’t confirm whether pro forma financials are accurate, but they can check whether they are properly presented and add up.)