Pro forma

The termpro forma(Latinfor "as a matter of form" or "for the sake of form" ) is most often used to describe a practice or document that is provided as a courtesy or satisfies minimum requirements, conforms to anormordoctrine,tends to be performedperfunctorilyor is considered aformality.The term is used inlegalandbusinessfields to refer to various types of documents that are generated as a matter of course.

Accounting

Thepro formaaccounting is a statement of the company's financial activities while excluding "unusual and nonrecurringtransactions"when stating how much money the company actually made. Examples of expenses often excluded frompro formaresults are companyrestructuringcosts, a decline in the value of the company's investments, or other accounting charges, such as adjusting the currentbalance sheetto fix faulty accounting practices in previous years.

There was a boom in the reporting ofpro formaresults in the US starting in the late 1990s, with manydot-com companiesusing the technique to recast theirlossesasprofits,or at least to show smaller losses than the USGAAPaccounting showed. TheU.S. Securities and Exchange Commissionrequirespublicly traded companiesin the United States to report US GAAP-based financial results, and has cautioned companies that usingpro formaresults to obscure US GAAP results would be consideredfraudif used to misleadinvestors.

Business

Financial statements

Further information:Financial modeling § Accounting

Inbusiness,pro formafinancial statementsare prepared in advance of a plannedtransaction,such as a merger, an acquisition, a new capital investment, or a change in capital structure such as incurrence of newdebtor issuance ofstock.

Thepro formamodels the anticipated results of the transaction, with particular emphasis on the projectedcash flows,net revenues and taxes. Consequently,pro formastatements summarize the projected future status of a company, based on the current financial statements.Pro formafigures should be clearly labeled as such and the reason for any deviation from reported past figures clearly explained.

For example, when a transaction with a material effect on a company's financial condition is contemplated, the finance department will prepare, for management andboardreview, abusiness plancontainingpro formafinancial statementsdemonstrating the expected effect of the proposed transaction on the company's financial viability. Lenders and investors will require such statements to structure or confirm compliance withdebt covenantssuch as debt service reserve coverage anddebt to equity ratios.Similarly, when a new corporation is envisioned, its founders will preparepro formafinancial statementsfor the information of prospective investors. Also, banks will requestpro formastatements in lieu oftax returnsfor astart up businessin order to verify cash flow before issuing a loan orline of credit.

Invoices

In trade transactions, apro formainvoiceis a document that states a commitment from the seller to sellgoodsto thebuyerat specified prices and terms. It is used to declare the value of the trade. It is not a true invoice because it is not used to recordaccounts receivablefor the seller andaccounts payablefor the buyer.

Simply, a "pro formainvoice "is a" confirmedpurchase order"where buyer and supplier agree on detail and cost of the product to be shipped to the buyer. Apro formainvoice is generally raised when the seller is ready for dispatching the material but they want to ensure that the payment is being sent before dispatch. And similarly, the customer also wants to know which components are included in thepro formainvoice to avoid disagreements later.

Asales quoteis prepared in the form of apro formainvoice, which is different from acommercial invoice.It is used to create a sale and is sent in advance of thecommercial invoice.The content of apro formainvoice is almost identical to a commercial invoice and is usually considered abinding agreement,but because apro formainvoice is not a legally-binding document, the price may change in advance of the final sale.

Apro formainvoice can also be used for shipments containing items thatare notbeing bought or sold, such as gifts, samples and personal belongings, whereas a commercial invoice is used when the commodities shippedarebeing bought or sold.However, it is best to use a customs invoice or declaration as border officials require values for the export declaration.A Customs Invoice or declaration is commonly used inNew Zealandfor air parcel post shipments.

International trade

Apro formainvoice is the same as a commercial invoice, which, when used in international trade, represents the details of an international sale to customs authorities. Apro formainvoice is presented in the place of a commercial invoice when there is no sale between the sender and the importer (for example, in the case of anRMAfor replacement goods), or if the terms of the sale between the seller and the buyer are such that a commercial invoice is not yet available at the time of the international shipment. Apro formainvoice is required to state the same facts that the commercial invoice would and the content is prescribed by the governments who are a party to the transaction.

In some countries,customsmay accept apro formainvoice (generated by theimporterand not theexporter) if the required commercial invoice is not available at the time when filing entry documents at theport of entryto get goods released from customs. TheU.S. Customs and Border Protection,for example, usespro formainvoices to assessdutyand examine goods, but the importer on record is required to post abondand produce a commercial invoice within 120 days from the date of entry. If the required commercial invoice is needed for statistical purposes, the importer has to produce the commercial invoice within 50 days from the date Customs releases the goods to the importer.

Law

Inlaw,pro formacourt rulingsare intended merely to facilitate the legal process (indeed to move matters along).

Government

Westminster system

In certainCommonwealthnations with aWestminster system,such as theUnited Kingdom,Canada, andAustralia,pro formabills are introduced immediately before consideration of thespeech from the throne.Pro formabills are incomplete pieces of legislation and undergo only thefirst readingstage. They symbolize the authority of theparliamentto discuss matters other than those specified by thehead of state,for which ostensibly parliament was summoned. After first reading, the bill is never considered further. Thepro formabill was first introduced in theHouse of Commons of Englandin 1558.

In theParliament of the United Kingdom,the equivalents are theOutlawries Billin theHouse of Commonsand theSelect Vestries Billin theHouse of Lords.In theParliament of Canada,such bills are titledBill C-1, An Act respecting the Administration of Oaths of Office, and Bill S-1, An Act relating to Railwaysin theHouse of Commons of CanadaandSenate of Canada,respectively. In theAustralian House of Representatives,a new bill is drafted at the start of each parliamentary term (in the47th Parliamentthis was theCustoms Amendment Bill 2022) and presented by the Prime Minister. The bill undergoes the first reading, but a second reading is not moved unlike normal bills.However, departing from British and Canadian tradition, the contents of the bills do address the matters referred to in its title, and could theoretically be enacted like any other normal bill. This practice does not extend to theAustralian Senate;instead other formal business is conducted (such asquestion time) before consideration of the governor-general's speech.

United States

In the federal government of the United States, eitherhouseof theCongress(theHouse of Representativesor theSenate) can hold apro formasession at which no formal business is expected to be conducted.This is usually to fulfill the obligation under theConstitution"that neither chamber can adjourn for more than three days without the consent of the other."Pro formasessions can also be used to prevent thepresidentfrompocket-vetoingbills, or calling the Congress intospecial session.They have also been used to prevent presidents from makingrecess appointments.

In 2012 PresidentBarack Obamaattempted to make four appointments during apro formasession,calling the practice of blocking recess appointments into question.However, in 2014 theSupreme Court of the United StatesinNLRB v. Noel Canningdetermined that the President had improperly used his presidential power to make these appointments, stating that while the Senate was in recess punctuated bypro formasessions the period of time between the sessions was not long enough to invoke such power.

In April 2020, PresidentDonald Trumpclaimed that the president's constitutional power to "convene or adjourn Congress" "on extraordinary occasions", a power that has never been used to adjourn Congress, though it has been used on rare occasions to convene Congress, empowers him to suspend both houses of Congress (overriding the pro forma procedure) and enabling him to make appointments to vacant government positions while Congress is suspended. The suggestion was condemned byJoe Lockhart.In addition, the President's Constitutional power to adjourn either or both houses of Congress is limited to situations in which the "Time of Adjournment" is disagreed upon between the House and Senate creating a "Case of Disagreement", which implicates Article I, Section 5 of the Constitution, which prohibits either house of Congress from adjourning for more than three days without the consent of the other house of Congress.However, the system of pro forma sessions every three days by both houses of Congress would appear to represent an obstacle to finding a Constitutional "Case of Disagreement" between the houses of Congress regarding an adjournment of more than three days if neither house of Congress ever deems itself adjourned for more than three days and therefore never seeks the consent of the other house of Congress to adjourn and therefore never creates a situation in which a "Case of Disagreement" could arise to authorize the President to exercise this power.

Similar practices exist in thestate legislatures,and for similar reasons; for example, inMinnesota,legislative bodies have the same every-three-days meeting requirement that Congress has.Pro formasessions are held to meet this requirement.

See also

• Buzzword
• Choice architecture
• Customer service
• Demand chain
• Point of sale
• Retailing
• Sales (accounting)
• Sales Incentive Plan
• Sales process engineering
• Sales management
• Sales territory
• Sales variance
• Selling
• Trade
• Transaction
• Vendor