Question
On February9, 2002, an article in The Economist stated that thehigh-tech industry seems to be inventing new accounting documents and rules.Non-standard pro-forma accounting is popular.
"On February9, 2002, an article in The Economist stated that thehigh-tech industry seems to be inventing new accounting documents and rules.Non-standard "pro-forma" accounting is popular. Earnings are not calculated according toGAAP, but by creating unique formulas that exclude"special expenses." This tends to improve the bottom line. In January2002, Amazon announced three different kinds ofprofit: $5m net profit in the previousquarter, calculated underGAAP; $59m"pro-forma operatingprofit;" and$35m "pro-forma netprofit." "Pro-forma operatingprofit" excludes stock optionexpense, amortization ofgoodwill, and restructuring costs."Pro-forma netprofit" excludes currency gains and losses and the"cumulative effect of change in accountingprinciple."
What are the pros of pro-forma accounting disclosure described above?
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