Pro forma earnings
Financial Accounting glossary · Financial Accounting
Definition
Non-GAAP earnings measure adjusting reported results for specified items (often one-time or non-cash); requires reconciliation to GAAP under SEC Regulation G.
Pro forma earnings in plain English
When a company reports its profits, there are official rules (called GAAP) for exactly how to calculate them. "Pro forma" earnings are a company's own alternate version of profit, where they strip out things they say aren't part of normal business — like a one-time lawsuit payout or a big cost that doesn't involve real cash. It's like telling your parents your grade "would have been" an A if you ignore the test you bombed the day you were sick — sometimes fair, sometimes a convenient spin. Because companies could abuse this to look better than they are, the SEC (the market's referee) requires them to also show the official number and explain exactly what they took out.
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