Accounting & Tax

Earnings Reports Come Under Fire

At a congressional hearing, lawmakers and accounting experts take aim at pro forma earnings.
CFO.com StaffAugust 1, 2001

U.S. lawmakers took aim Tuesday at the growing corporate practice of presenting financial statements two different ways: one to satisfy regulators, the other to put the best face on results.

According to a Reuters report published in the Los Angeles Times, lawmakers and accounting experts at a congressional hearing offered words of warning to investors, saying so-called pro forma earnings statements may not present the truest picture of financial reality.

In addition, the panel was told, there are no pro forma reporting standards, meaning companies are free to prepare their books as they want, often in a way that paints a rosy picture of financial health.

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Read full story at Latimes.com.