if P&L and CFO give different D&A numbers, which one should I use to calculate EBITDA?
check and see if the fin. statements are qualified from auditor, then use the figure that gives you more “conservative” projection.
I’m thinking the difference could be due to the P&L showing just depreciation while the CF stmt shows both D&A together (because amortization was lumped into another line item on the P&L). Also, if it is a manufacturing company then they may be allocating some depreciation to COGS. Or it could possibly mean that they are amortizing some bond issue costs to interest expense separate from the D&A line item on the P&L. Personally, I would be adding back the D&A from the CF statement.
Use the one from the Income Statment because that was the one that was deducted from to get you to net income and operating income. You dont want to add back the cash flow depreciation as you dont know where on the income statement that number is coming from…if you start from operating income (EBIT) on the Income Statment and are looking to add back depreciation to get to EBITDA, by using the cash flow depreciation you might actually be adding back depreciation that hasnt even been deducted yet (might be below operating income foe some reason). This goes the same for other non cash items you see on the cash flow statement. You need to know where they are hitting on the income statemtn before you add them back to get to EBITDA. The depreciation issue is almost never a problem as they rarely differ and dont differ by much when they do.
from my understanding, some of the depreciation/amortization may not have been tax deductible.
aic Wrote: ------------------------------------------------------- > Use the one from the Income Statment because that > was the one that was deducted from to get you to > net income and operating income. You dont want to > add back the cash flow depreciation as you dont > know where on the income statement that number is > coming from…if you start from operating income > (EBIT) on the Income Statment and are looking to > add back depreciation to get to EBITDA, by using > the cash flow depreciation you might actually be > adding back depreciation that hasnt even been > deducted yet (might be below operating income foe > some reason). This goes the same for other non > cash items you see on the cash flow statement. > You need to know where they are hitting on the > income statemtn before you add them back to get to > EBITDA. > > The depreciation issue is almost never a problem > as they rarely differ and dont differ by much when > they do. can you give me some examples where D&A would hit below the line on the income statement? what we usually do is just to add back D&A from the cash flow statement because it quantifies the number that is non-cash, which is what you care about when you’re calculating EBITDA. plus, even though a lot of companies have some element of D&A in COGS and other opex lines, many of them don’t break it out on the P&L.
Usually D&A varies from IS to CF if there are assets held for sale or discontinued ops which have been segregated out.