1. What is pro forma reporting according to regulation SX of the SEC? How has pro forma reporting been used by corporations over the years? Summarize the arguments for and against this type of...

What is pro forma reporting according to regulation SX of the SEC? How has pro forma reporting been used by corporations over the years? Summarize the arguments for and against this type of reporting
Ans1:- Proforma earnings as per SX are type of earnings which doesn’t include non recurring items. It should not be able to be derived by GAAP standard. However, Corporate started using it by not showing nonrecurring items to manipulate earnings so as to manipulate investors. Investor must be cautious while reading profoma income statement as it doesn’t comply with any rules and regulation because of which right earnings scenario are not reported compare to GAAP.
The items which are excluded in proforma earnings are as follows;-
1) Goodwill
2) Amortization
3) Obsolete items
4) Non recurring income items
5) Research and development expenditure
Problem of Proforma Earnings
1) Companies show positive earnings by excluding mergers and acquisition expense and also other non recurring expense and also expect people to forget. It is in a way to misled people.
2) Companies also exclude inventory from the balance sheet which is an example of bad financial reporting as management invests money in producing such inventory.
Advantages of Pro-Forma Analysis 
1) Proforma earning is here advantage as it doesn’t includes any non-recurring items. It means it is showing the correct picture of the operating income.
2) Proforma earning is used to carry equity valuation as it doesn’t include any non-recurring items. It means it is showing the correct picture of the operating income. Through this correct picture it will be helpful to calculate the true value of the corporation.
3) Quality of earnings can be best determined through proforma earning as it doesn’t include any non-recurring items. It means it is showing the correct picture of the operating income.
Exhibits 1 and 2 provide sample earnings announcements and pro forma information released by Proxim and Cisco...