Question

Discuss the differences between GAAP financial statements and pro forma statements?

Answer 1

Difference between GAAP financial Statements and Pro Forma financial statements

Basis	GAAP Financial Statements	Pro Forma Financial Statements
Regulations	It is regulated by the reporting standards and guidelines of Financial accounting standard board of USA.	These are not regulated with any principles or guidelines, these are prepared by management based on future assumption and projections. It is not regulated.
Use	These statements are official statements of the company and is being used by all the external parties which includes suppliers, investors, government etc.	It is used primarily by analysts while making investment decisions in the company. It is also used and prepared by management for ascertaining impact of certain events and transactions within the company.
Accuracy	GAAP statements may not show true and fair worth of a company because of stiff regulations and accounting boundations involved in preparation of these statements.	It shows the real value and worth of the company in the eyes of management and investors. These are more accurate as compared to GAAP.
Time required for preparation	The time involved in preparation is much higher than pro forma financial statement.	It is usually prepared after the preparation of financial statements which were based on GAAAP, therefore it does not take much time for preparation because the data is readily available with the management.