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Pro forma financial statements meaning
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What does Pro forma financial statements mean?
Pro forma financial statements are illustrative financial information showing how a transaction (for example, an acquisition, disposal, refinancing or reorganisation) would have affected an issuer’s financial position and results if it had occurred at an earlier date. They are widely used in UK and Irish legal practice in M&A, IPOs and other capital markets transactions, including prospectuses, shareholder circulars and regulatory announcements.
The term is descriptive rather than a statutory definition, but content and presentation are governed in the UK by the FCA’s Prospectus Regulation Rules and Listing Rules, and in Ireland by the EU Prospectus Regulation and Euronext Dublin rules (with ESMA guidance). In regulated documents, pro forma information:
- is derived from historical financial statements;
- includes only adjustments that are directly attributable to the transaction, factually supportable and, where relevant, expected to have a continuing impact; and
- typically reflects items such as the target’s results, financing costs, disposal effects and reorganisation steps.
Anticipated cost or revenue synergies are generally excluded unless sufficiently verifiable. Pro forma financials are commonly accompanied by a reporting accountant’s compilation report (e.g., under ISAE 3420) rather than an audit. Usage and requirements are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland.
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View the related Practice Notes about Pro forma financial statements
PRACTICE NOTES
UK Banking, Finance, Capital Markets, Derivatives and Insolvency Law Glossary including Islamic finance
Banking & Finance glossary A Auditing and Accounting Organisation for Islamic Financial Institutions (AAOIFI) The foremost Islamic, international, autonomous, independent, not-for-profit corporate body that develops and issues accounting, auditing, governance, ethics and Shari’ah benchmarks and standards for Islamic Financial Institutions (IFIs) and the wider Islamic finance sector. Founded in Bahrain in 1991, it is backed by a number of institutional members across more than 45 countries, including central banks and regulatory authorities, financial institutions, accounting and auditing practices, and legal firms. Its pronouncements are currently applied by leading Islamic financial institutions across the world and have advanced a progressive and gradual harmonisation of global Islamic finance practice. It also delivers professional qualification programmes—notably Certified Islamic Professional Accountant (CIPA), Certified Shari’ah Adviser and Auditor (CSAA), and the corporate compliance programme—in efforts to strengthen the industry’s human capital and governance frameworks. For further details, see Practice Note: Key participants in the Islamic finance industry—Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Acceleration Acceleration is the formal action...
22 May
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PRACTICE NOTES
Archived: PR App 3 Annex I resource—share registration document disclosure under former UK Prospectus Rules, with FCA/ESMA guidance and ongoing relevance under UK Prospectus Regulation (including Brexit impacts).
ARCHIVED: This Practice Note has been archived and is not maintained. Last updated July 2019. On 21 July 2019, the Prospectus Regulation (EU) 2017/1129 came fully into force across EU member states, and the Prospectus Directive was repealed. The Regulation now determines when a prospectus must be published for an offer of securities to the public in the UK, or for the admission of securities to trading on a regulated market in the UK. To implement this, the FCA aligned the FCA Handbook by removing the Prospectus Rules in their entirety and substituting the Prospectus Regulation Rules sourcebook. For more details, see Practice Note: The UK Prospectus Regulation—essentials [Archived] and The UK Prospectus Regulation—is a prospectus required? [Archived]. This note, together with related notes on the now repealed Prospectus Rules, has been preserved for reference, as its commentary may still apply to corresponding provisions within the Prospectus Regulation Rules (PRR). This Resource Note points to relevant commentary, analysis and resources to support interpretation and...
21 May
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