EbitdaC = Ebitda + permanent Coronavirus charges

Accounting should provide comfort for those who need closure, the satisfaction of sums. Take costs away from revenues then pocket the remainder. However, a recent innovation — ebitdac — underscores the difficulty of gaining satisfaction from financial accounts. Germany’s Schenck Process this week gave this moniker to its adjustment for coronavirus effects upon corporate profits. Others may follow. Investors do need this information if significant, and unusual. The problem comes when these earnings adjustments become the norm. Consider the context of any accounting tweaks. Investors focus on profit trends. In turn, financial directors, often well-versed in the dark arts of accounting, will try to present the best earnings picture to shareholders… Just coining the term ebitdac — earnings before interest, tax, amortisation, depreciation and coronavirus charges — gives this adjustment a permanence that it should not have. Reporting one period of changes is only useful if these are repeatedly and clearly disclosed… Accounting watchdogs already debate the varying calculations of ebit and ebitda in company accounts… Finance directors have enough on their hands presenting the distortions from recent accounting rule changes… Ebitdac should mark only an unusual step away from the earnings trend, not become the norm. 

Lex.

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