Response to the following problem:
You Decide: Should pro-forma financial statements be prepared in a manner consistent with GAAP, or do pro-forma statements provide enough useful information to investors in their current form?
Most financial statements prepared by companies and filed with the Securities and Exchange Commission are prepared using generally accepted accounting principles. However, proforma financial statements are often not prepared in accordance with these standards. Many of the numbers included by companies in these "pro-forma" statements are based on assumptions that are not recognized as appropriate for SEC filings. Sometimes, companies highlight positive information and leave out information about certain costs or charges, such as stock-based compensation, interest, and taxes. The real question is whether or not investors are being misled.