Definition of pro forma earnings per share

Pro forma earnings per share are earnings that have been adjusted from regular GAAP (generally accepted accounting principles), usually by excluding one or more cost to give what the preparer believes is a truer picture of its underlying profitability.

The costs most commonly added back to earnings in this way are one-off restructuring expenses and goodwill amortisation costs from an acquisition.

The use of pro forma earnings, which are published alongside GAAP numbers, is controversial since it gives companies greater freedom to present their figures in a way they choose, and the figures are not audited. However, investment analysts often assess a company based on its pro forma numbers, giving greater validity to the practice.  [1]

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