[BetaFin Insights] Adjusted EBITDA :)

This week, a post of mine got fairly viral on LinkedIn, with 7 lac+views in 24 hours, 6300+ likes?shorturl.at/lJMV6

It was centred around?companies?reporting Adjusted EBITDA in their performance scorecard and?taking the liberty to exclude multiple cost items from the same.?

"When Adjusted EBITDA excludes Marketing & Branding Costs, ESOP Costs, Operating Loss of Subsidiary, Impairment Loss, R&D Costs"

The argument in favour of EBITDA was that it is a cleaner metric for depicting operational performance and a good proxy for cash flow

However?giving that there is no standardisation. And thus the creative liberty used by companies . Take the case of Zomato's recent earnings release.?

SEC allows filers to use measures like Adjusted?EBITDA, in press releases and SEC?filings. It is termed as a non-GAAP measure. comparable across entities.

Investment Gurus like Charlie Munger and Warren Buffett have strongly expressed concerns around EBITDA - “When CEOs tout EBITDA as a valuation guide, wire them up for a polygraph test".In Berkshire Hathaway’s 2000 shareholder letter, he went so far as to say: “When Charlie and I read reports…references to EBITDA make us shudder – does management think the tooth fairy pays for capital expenditures? We’re very suspicious of accounting methodology that is vague or unclear, since too often that means management wishes to hide something.”

Maybe the way forward for regulators could be to incorporate ‘EBITDA’ into IFRS terminology and assign an IFRS-described measure.

What's your?take on this ??