The term “pro forma” in front of any financial statement primarily serves to label that version of the statement as not adhering to the strict “generally accepted accounting principles” (GAAP) standards that all publicly-traded companies must use to produce their financial statements.

Major corporations use pro forma statements to illustrate projected numbers, like in the case of a merger or acquisition, or to emphasize certain current figures.

GAAP standards don’t apply to small businesses, so you don’t really need to worry about distinguishing your financial statements as “pro forma” or not—everyone you show them to expects that they’re not GAAP-compliant. But if you want to be technically correct in your terminology, go ahead and call your financial statements “pro forma.”

Was this article helpful?
1 Star2 Stars3 Stars4 Stars5 Stars (2 votes, average: 5.00 out of 5)
Trevor Betenson
Trevor Betenson

Trevor is the CFO of Palo Alto Software, where he is responsible for leading the company’s accounting and finance efforts.