Question: QUESTION 1. What is PRO FORMA reporting according to regulation SX of the SEC? How has PRO FORMA reporting been used by corporations over the

QUESTION

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 reporting.

2. Provide sample earnings announcements and PRO FORMA information release by Proxim and Cisco systems, respectively. Do you believe these disclosures are consistent with the spirit of the SEC regulation or are they corporate abuses of financial disclosure? As a CFO of these companies, what would you have reported in your earnings announcement for the respective period?

3.Do you believe the SEC should permit the type of disclosure shown in Exhibits 1 and 2?

4. What is the usefulness of the PRO FORMA versus GAAP earnings disclosure found in Exhibits 1 and 2 with regards to evaluating:

a. Recent financial performance

b Expectations of future earnings

c. Credibility of Management

d. Quality of earnings

e. Equity valuation

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