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[quote user="CMStPnP"] [quote user="Sam1"] "Anyways, again......bad to use pro forma statements for a financial analysis.    That was in one of my first level college accounting courses as well.     Always use the fully stated audited statements." <h2>Definition of 'Pro-Forma Forecast' (Investopedia)</h2> A financial forecast based on pro-forma income statements, balance sheet and/or cash flows. Pro-forma forecasts are usually created from pro-forma financials, which are forecasted using basic forecasting procedures. Often, revenues will provide the initial groundwork for the forecast, while expenses and other income statement items will be calculated as a percentage of future sales. If you forecasting you don't have audited financial statements. If you know what your are doing, you put together pro-forma financials and have them audited.  The auditor will not attest to the financials, as in a normal audit, since there are no underlying source documents, but he can attest to the assumptions, formulas, consistency of principles application, estimates, etc. [/quote] Well you selectively edited what was stated in that online article or definition via cut and paste.      Why did you leave this relevant part out?........ "However, companies can also manipulate their financial results under the guise of pro-forma financial statements to provide a picture that is rosier than reality. Let's take a closer look at what pro-forma financial statements are, when they are useful and how companies can use them to dupe investors." I stand by what I stated before and most CPA's will stand by the bolded statement above as well as what I posted earlier.    I use two of them on a regular basis one in Texas and one in Wisconsin.  When you forecast financial statements and use the pro forma approach you should also start with audited financial statements as a base year (they should represent year zero) and describe what was the approach you used to forecast and extend the forecast including the use of benchmark growth rates, past earnings, etc.     Thats if you want to be taken seriously. You don't just flop pro forma statements out there with no base and say walla....these are pro forma statements.    Like any forecast done in any field of study you need a solid base (or foundation) from which to start a forecast.    Thats if you want to be taken seriously.     If your just doing this as a hobby on the side with no deference to accuracy and just flopping them out there......I guess nobody cares but then........why go through all that trouble?. [/quote] How could a start-up company start with base year financial statements?  It does not have any financial statements. Everything is proforma at this stage of the game. As noted clearly, the name of the game is to have the proforma statements audited by an outside auditor to prevent abuse.  The purpose of the audit is to make sure that the sponsors are not gaming the statements, i.e. presenting fraudulent accounting statements.  Any accounting and financial statements can be manipulated. This is the reason why the financial statements of all public corporations and most private corporations are audited by outside auditors.  You don't appear to understand the difference between the financial statements for an on-going entity and the proforma statements (forecasts) for a proposed start-up.
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