Compilation of pro forma financial information

Abstract

This chapter describes the complication of pro forma financial information. According to AR-C section 120, Compilation of Pro Forma Financial Information,1 contains performance and reporting requirements and application guidance for accountants engaged to perform a compilation engagement on pro forma financial information. The accountant's objective in a compilation of pro forma financial information is to apply accounting and financial reporting expertise to assist management in the presentation of pro forma financial information and report in accordance with AR-C section 120 without undertaking to obtain or provide any assurance on the pro forma financial information. Pro forma financial information shows what the significant effects on historical financial information might have been had a consummated or proposed transaction (or event) occurred at an earlier date. Pro forma financial information is developed by applying pro forma adjustments to historical financial information. Appropriate pro forma adjustments are based on management's assumptions, give effect to all significant effects directly attributable to the transaction (or event), and are stated on a basis consistent with the financial reporting framework of the reporting entity and its accounting policies under that framework.