What are pro forma financial statements?

Pro forma financial statements are modified financial statements using projections or explanations of financial statements a company may release with their income statement, cash flow statement, and balance sheet. The pro forma financial statements do not have to adhere to any standard and should be read skeptically, but they may shed insight into a company's performance by explaining how some costs were unusual and should not be projected into the future. For example, a company may have higher inventory costs due to a one-time accident that required a lot of reorders which would be reflected on the pro forma financial statements to explain that lower profits in that particular quarter were unusual.