The DA in EBITDA is not DA at all

Let’s take seven well known companies’ financial statements and see what they say about EBITDA.

Amazon, GSK (GlaxoSmithKline), and Johnson & Johnson do not have EBITDA in their 2021 annual report at all.

Roche, in their 2021 annual report, recognise my claim that EBITDA is not used by companies as a measure in their financial statements:  

“The Group does not use … EBITDA in either its internal management reporting or its external communications.”

But they are cooperative with their readers and continue with:

 “For the convenience of those readers who do use EBITDA, this is provided in the table below.”

And they give a calculation by business segment of EBITDA for the two years 2020 and 2021. How about that?

The auditors alone mention EBITDA in the Walgreen Boots 2021 annual report, as part of their discussion of Critical Auditing Matters. They bring in what they call ‘EBITDA margins’, whatever that might be, requiring ‘a high degree of audit judgement’. 

AstraZenica like EBITDA the most with 15 mentions in their 2021 annual report and have a calculation they call a ‘reconciliation’ to help their readers.

Associated British Foods like EBITDA too. They sprinkle it around their 2021 annual report five times. They even calculate it specifically in Note F to the financial statements and include an impairment charge in their EBITDA calculation.

This is my proof that the initials EBITDA are incorrect. The DA in EBITDA should be replaced with DAI. It should be EBITDAI: Earnings before Interest and Taxes and Depreciation and Amortisation and IMPAIRMENT.  EBITDA is a myth without the ‘I’ for impairment.

But accountants always have an answer to irreverent comments, they argue, of course, that companies do not always have impairment charges, but usually have both depreciation and amortisation. So they think their DA is correct most of the time. And that is good enough for them.