Legal Definitions - Pro forma

Definition: Pro forma is a Latin term that means something is done as a formality. In securities law, pro forma refers to financial statements that are prepared in advance of a transaction and projects the anticipated results of the transaction.

For example, if a company is planning to merge with another company, they may prepare pro forma financial statements to show what the combined company's financials would look like. This helps investors and analysts understand the potential impact of the merger on the company's financials.

Another example of pro forma financial statements is when a company is going public through an initial public offering (IPO). The company may prepare pro forma financial statements to show what their financials would look like if they had been a public company in the past.

These examples illustrate how pro forma financial statements are used to project the financial impact of a transaction or event. They are important for investors and analysts to understand the potential risks and benefits of investing in a company.