financial information should be labeled as such to distinguish it from historical financial information.
Financial Executives International (FEI) and the National Investor Relations Institute (NIRI), both important players in the financial markets, have recently issued guidance to help ensure the appropriate reporting of pro forma
Regulators and other critics of pro forma
reporting, however, are skeptical about managers' claims (Liesman and Weil 2001a, 2001b).
One is that pro forma
earnings attempt to enable an apples-to-apples comparison by excluding one-time items, both expense and revenue items.
information must enhance the understanding and ability of investors to utilize current performance measures to more effectively predict future performance while providing a clear roadmap to GAAP-based measures.
earnings reports are not reviewed by any independent party prior to their release, so there are no checks on the reasonableness of which items management chooses to exclude.