EBITDA in P&L

[Leo]

Hi everyone,

Our company wants to show the aggregate EBITDA in the primary Profit and loss statement. However, the auditors had refused to let us do it because EBITDA isn't defined by IFRS.

Did you already see some listed companies showing EBITDA in their primary profit & loss statement?

Is this strictly forbidden, what's the reason behind that?

Thank you.

BR

[exIFRS]

I don't think it is explicitly precluded, and non-IFRS defined subtotals are permitted and discussed at IAS 1.85. There are requirements about how they are developed and presented IAS 1.85B. There is a bit of discussion in the Basis for Conclusions that might be worth reviewing (IAS 1.BC38A - D). You might be interested in this paper by staff from the IASB that notes In Appendix A about para A2 (edited):

Use of EBITDA
Both our research and outreach confirmed that EBITDA is widely used by:
(a) entities in their financial statements and other financial reporting materials (see paragraph A3–A4);
...
The staff reviewed annual reports and other financial reporting materials (for example transcripts and presentations for earnings calls) of 85 entities applying IFRS Standards, across a range of industries (excluding financial entities) and geographies. The staff found that:
...
(f) 72 entities use EBITDA. Among these entities:
...
For the 42 entities who use EBITDA inside the financial statements, we found that:
(a) EBITDA was most often used as a segment measure of performance (23 entities) or in disclosures about capital structure and debt (18 entities)—for example describing the requirements of debt covenants or describing a target capital structure (eg net debt/EBITDA < 2).
(b) four entities presented EBITDA as a subtotal in the statement(s) of financial performance.

https://www.ifrs.org/-/media/feature/me ... 1a-pfs.pdf

[Leo]

Thank you !

[Marek Muc]

operating income is not defined by IFRS as well, yet it is a very common subtotal on the face of P/L

do you report 'plain' EBITDA in your investor communication? i.e. just a subtotal without any adjustments for specific items?

[JRSB]

Yes I see that occasionally. I assume it's not a big audit firm? There's a huge amount of variation and subtotals (isn't there a project to better co-ordinate disclosures and reconciliations around this?)

[Marek Muc]

IASB will most likely introduce a requirement to present additional subtotals (incl. operating income)

they will also give recognition to "operating profit or loss before depreciation and amortisation" which if voluntarily added to P/L will be treated as a subtotal specified by IFRS Standards (para. 104 of ED)

but generally it is possible to add EBITDA under current version of IAS 1 provided that requirements in para 85A are met (i.e. no specific adjustments)

[pub_acco]

I tried to present EBITDA on the face of P&L in the past and failed I remember the key was IAS 1.85A(a) and "DA" because some part of depreciation charges (e.g. those of a manufacturing factory) were included in the cost of inventories in accordance with IAS 2, and therefore it was not possible to extract the entire depreciation charges as a single line on the face of P&L.

[Marek Muc]

Yep, this is doable only with expenses presented by nature

[pub_acco]

Aha makes sense