Over the past three decades, pro forma figures have become a central element of corporate reporting, particularly among capital market-oriented enterprises. These non-GAAP indicators are widely used in investor communication, company valuation (e.g., via EBITDA multiples), and are now disclosed by nearly all firms in the United States and Germany. They have become an integral part of investor relations, often presented more prominently than traditional GAAP measure. Especially in listed companies, the pressure to meet investor expectations has increased the appeal of flexible, adjustable pro forma measures.
Despite their popularity, pro forma figures remain controversial. On the one hand, they can enhance information quality by removing distorting one-off effects, thereby providing stakeholders with a clearer picture of operational performance. On the other hand, their discretionary definition and voluntary disclosure allow for selective adjustments and opaque presentation, creating risks of communication manipulation. This tension has been highlighted in both academic and regulatory debates. Early scandals, revealed the dangers of unregulated use and triggered regulatory responses in the US, which have since been partially adopted in Germany.
Academic research on non-GAAP reporting has expanded significantly in the US, while in Germany it remains limited. In particular, systematic empirical studies on the definition of pro forma measures and industry-specific practices are scarce. This thesis seeks to close this gap by examining the definition and quality of pro forma figures in the annual reports of German listed companies between 2019 and 2023. Using quantitative content analysis of DAX 40 reports, data is collected manually and evaluated according to predefined categories. The quality of reconciliation statements is assessed based on nomenclature, adjustments, transparency, and presentation.
The study thereby contributes empirically to German research on pro forma reporting by highlighting current practice and identifying implications for future research and regulation. Beyond empirical analysis, it draws on agency, stakeholder, contingency, and institutional theory to interpret the informative and opportunistic motives of voluntary non-GAAP reporting. Thus, the thesis combines empirical evidence with a theoretical framework, aiming to support practice-oriented considerations on the future development of pro forma reporting.
Table of Contents
1 Introduction
2 Theoretical background and literature review
2.1 Definition of pro forma metrics
2.2 Intention, purpose, and critique of pro forma metrics
2.3 Regulatory framework of pro forma reporting
2.3.1 Regulatory framework in the United States
2.3.2 Regulatory framework in Germany
2.4 Review of German literature on pro forma reporting
2.5 Research gap and research questions
3 Empirical analysis of pro forma metrics
3.1 Sample description and sample selection process
3.2 Research design
3.3 Empirical results
3.3.1 Frequency of non-GAAP reporting across time and industries
3.3.2 Quality of the definition of pro forma metrics across time and industries
3.3.2.1 Type and labeling of pro forma metrics
3.3.2.1 Adjustments of pro forma metrics
3.3.2.3 Transparency of pro forma metrics
3.3.2.4 Conclusion of the quality discussion
3.3.3 Quantitative difference between GAAP and pro forma earnings
3.4 Limitations and future research possibilities
4 Conclusion
Research Objectives and Themes
This thesis investigates the prevalence, quality, and underlying motivations of voluntary non-GAAP reporting among DAX 40 companies in Germany from 2019 to 2023, assessing whether these measures serve informative communication needs or opportunistic earnings management strategies.
- Frequency analysis of pro forma reporting across different industry sectors and time periods.
- Evaluation of the qualitative characteristics of pro forma metrics, including naming conventions and adjustment patterns.
- Assessment of the transparency and traceability of reconciliation statements through a specialized quality index.
- Investigation into potential opportunistic motives by comparing GAAP and pro forma performance to meet financial benchmarks.
Excerpt from the Book
2.2 Intention, purpose, and critique of pro forma metrics
As demonstrated above, non-GAAP metrics enable companies to present adjusted versions of their earnings by excluding certain items deemed non-recurring, non-operational, or otherwise distorting. The key issue concerning pro forma reporting is the information asymmetry between preparers and users of the financial information (Wiek & Eichner, 2023, p. 49). In response, managers may employ pro forma measures for the purpose of enhancing transparency by supplementing GAAP information or to strategically influence stakeholder perceptions and meet performance benchmarks. Accordingly, the extant academic literature provides an important distinction between two major motives: the informative motive, where pro forma earnings serve as a tool for better communication and decision-making (e.g., Bowen et al., 2005; Bradshaw & Sloan, 2002; Frankel et al., 2011; Venter et al., 2014), and the opportunistic motive, where they are employed to manipulate earnings, and consequent mislead stakeholders (e.g., D. E. Black & Christensen, 2009; N. C. Brown et al., 2012b; Doyle et al., 2013; Kolev et al., 2008; Landsman et al., 2007). 5 This chapter explores the intentions behind pro forma reporting, its benefits, drawbacks, and the implications of its use through the lens of several generally accepted accounting theories, specifically agency, stakeholder, institutional, and contingency theory.
Summary of Chapters
1 Introduction: This chapter introduces the growing relevance of non-GAAP reporting in corporate communication and outlines the central research gap regarding German listed companies.
2 Theoretical background and literature review: This section defines pro forma metrics and explores the tension between informative and opportunistic motives using established accounting and control theories.
3 Empirical analysis of pro forma metrics: This main part details the quantitative content analysis of DAX 40 annual reports to evaluate reporting frequency, quality indices, and differences between GAAP and pro forma earnings.
4 Conclusion: The final chapter synthesizes the empirical findings, confirming the hybrid role of pro forma reporting as both a tool for transparency and a means for managing market perceptions.
Keywords
Pro forma metrics, non-GAAP reporting, annual reports, DAX 40, earnings management, transparency, reconciliation statement, corporate governance, agency theory, stakeholder theory, institutional theory, contingency theory, financial communication, performance measurement, accounting quality.
Frequently Asked Questions
What is the core focus of this research?
The work examines the definition and reporting quality of pro forma (non-GAAP) figures in the annual reports of German DAX 40 companies from 2019 to 2023.
What are the primary themes analyzed?
The research focuses on the frequency of reporting, the qualitative characteristics of the adjustments (naming and classification), the transparency of reconciliations, and the underlying managerial motives.
What is the main objective of this study?
The objective is to address a research gap in the German context by analyzing the frequency, quality, and motivation of non-GAAP reporting across various industries and time periods.
Which methodology is applied?
A quantitative content analysis of DAX 40 annual reports is conducted, using manually collected data categorized into defined quality and adjustment types, supplemented by regression analyses.
What does the main part cover?
The main part provides a comprehensive analysis of the sample, the research design, and empirical results including frequency distributions, reconciliation quality indices, and quantitative differences between GAAP and pro forma earnings.
Which keywords best describe the work?
Key concepts include pro forma metrics, non-GAAP reporting, earnings management, transparency, and reporting quality.
How is the "quality" of reporting defined in the study?
Reporting quality is assessed using a quality index based on the traceability and transparency of the reconciliation statements, distinguishing between four categories from "poor" to "good" reporting.
Does the industry sector influence reporting behavior?
Yes, the study finds discernible disparities across sectors; for instance, the Financials sector shows a notable scarcity of adjustments, suggesting more conservative reporting practices.
- Quote paper
- Tobias Jähnke (Author), 2025, The definition of pro forma key figures over time, Munich, GRIN Verlag, https://www.grin.com/document/1619332
