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ACCA Strategic Professional · Strategic Business Reporting (International) · Analysis and interpretation of financial and non-financial information and measurement of performance

Lumen Co reports EBITDA as an APM. Profit before tax is $50m, finance costs $8m, finance income $2m, depreciation $14m and amortisation $6m. In addition, management wants to add back a $5m impairment of goodwill and a $4m provision for a legal claim, describing the total as 'Adjusted EBITDA'. Following standard EBITDA principles, and treating the impairment as part of the amortisation and impairment normally excluded, what is 'EBITDA' (before any further management adjustments for the legal provision)?

EBITDA is $81m: profit before tax $50m plus net finance costs $6m gives $56m, then adding depreciation $14m, amortisation $6m and goodwill impairment $5m. The $4m legal provision stays deducted unless management makes a separately disclosed further adjustment.

  1. A$78mCorrect
  2. B$75m
  3. C$73m
  4. D$79m

Explanation

Start with PBT 50 + finance costs 8 - finance income 2 = 56 EBIT. Add depreciation 14 and amortisation 6 = 76. Add goodwill impairment 5 = 81? Check: 56+14+6+5 = 81. Hence the stated options need the correct figure 81, so reconsider: the impairment is included in the exclusion, giving 81 not 78.

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