Question

What is the difference between these two ? define each one

1- Pro Forma Operating Profitability

2- Profitability based on GAAP

(Please Type I can't read handwriting)

Answer 1

• Pro-forma Operating Income: This income refers to earning that is filtered from the statement of profit & loss as prepared in compliance with GAAPs (Generally Accepted Accountancy Principles). This income is filtered from non-recurring expenses of the organisation and reflects the performance of the business based on transactions of operating activities only. However, GAAPs allowed various non-recurring expenses while preparing the income statement of the organisation. This income is generally not in compliance with the operating income as per GAAPs, Standards, and rules and regulations for accounting. It is also treated as projected operating income of the organisation.
• Profitability based on GAAPs: Income statement based on Accounting Standards, GAAPs, and Rules & Regulation for Accounting includes all income and expenses of the organisation even it is of recurring nature or not. Revenue or expenses will be recorded if the recognition criteria are satisfied. This profitability will reflect the true and fair view of financial statements of the organisation on which all stakeholders can rely and trust because this is not a projected income of the organisation.