A financial statement that prepared on the basis of specific assumptions and projections, rather than on actual past transactions/ events/ results. By nature, illustrative statements are imaginary and provide example or “standardized” presentation and disclosure formats, and at times guidance on alternative presentations available. Such hypothetical financials are not intended to be exhaustive, but are mainly simplistic. Furthermore, only the most common and relevant standards and accounting policies are used as basis for preparation. The illustrative financial information is prepared for illustrative purposes only, as it addresses a hypothetical setting, and is not an indication of a state of affairs in a real entity.

Entities prepare illustrative statements for decision-making purposes (planning and control), and for external reporting to investors, creditors, and owners, as these statements provide a basis of comparison and analysis which, in turn, allow the broader stakeholders to get a picture about the entity’s financial structure under various scenarios and conditions.

Illustrative financial statements are also known as pro-forma financial statements.