Which of the following is true about a pro forma earnings number?
A) A pro forma earnings number is in total conformity with GAAP.
B) A pro forma earnings number is a forecast of earnings in future periods.
C) Reporting pro forma earnings by companies subject to SEC regulation is illegal.
D) A pro forma earnings number is regular GAAP earnings with certain exclusions.

Question

Quizplus · Accepted Answer

A pro forma earnings number is not in total conformity with GAAP as it may exclude certain items or adjust for non-recurring events. It is also not a forecast of earnings in future periods. Reporting pro forma earnings by companies subject to SEC regulation is not illegal, but it must be accompanied by a reconciliation to GAAP earnings. Therefore, the best choice is D, which states that a pro forma earnings number is regular GAAP earnings with certain exclusions.

Which of the Following Is True About a Pro Forma