Pro Forma
Financial statements or projections that exclude certain items or incorporate hypothetical assumptions to present a different view of performance.
What is Pro Forma?
Pro forma, Latin for 'as a matter of form,' refers to financial statements or projections that are constructed based on hypothetical scenarios or that exclude certain items from GAAP results. In M&A contexts, pro forma financials combine the acquirer and target as if the deal had been completed at the beginning of the reported period, helping stakeholders assess combined-entity performance. In earnings releases, companies present pro forma or adjusted results that strip out restructuring charges, acquisition-related amortization, stock-based compensation, and other one-time items to highlight recurring operating performance. While useful, pro forma figures are unaudited and companies have significant discretion in what they exclude — investors must scrutinize the adjustments carefully to ensure they are genuinely non-recurring.
Example
When Microsoft acquired Activision Blizzard in 2023, it provided pro forma revenue figures showing the combined company as if the acquisition had occurred at the start of fiscal 2022 — helping analysts understand the deal's financial impact without the distortion of a partial-year contribution.
Source: Investopedia — Pro Forma