Final answer:
Managers favor pro forma earnings as they believe this measure excludes one-time charges and provides a clearer reflection of a company’s ongoing operations, thus influencing investor expectations.
Step-by-step explanation:
Managers are often in favor of reporting pro forma earnings because they believe this measure can better reflect the actual financial performance of a company. Pro forma earnings can exclude one-time charges and certain expenses that the company considers non-recurring or not related to the core operating performance. This provides a clearer picture of a company's ongoing operations and can offer better comparability across financial periods. Managers might prefer this as it can also influence investor expectations and avoid the impression that included one-time events reflect the usual costs of running the business. It is worth mentioning, though, that pro forma earnings do not typically provide a conservative estimate of earnings nor do they include all potential risks and uncertainties as they are not generally accepted accounting principles (GAAP) compliant.