What Is Earnings Before Interest, Taxes, Depreciation, Amortization, and Special Losses (EBITDAL)?

Earnings before interest, taxation, depreciation, amortization, and special losses is a non-GAAP measure of a firm’s income that takes into account special losses that the firm does not expect to occur on a regular basis. EBITDAL is a variation on the more commonly used EBITDA, which is essentially an alternative calculation of net income.

Key Takeaways

  • Earnings before interest, taxation, depreciation, amortization, and special losses is a non-GAAP measure of a firm’s income that takes into account special losses that the firm does not expect to occur on a regular basis.
  • The deductions factored into EBITDAL can be grouped into three categories of operating costs: financing costs manifest in interest payments, accounting choices reflected in taxes, and non-cash expenses.
  • The additional cost that differentiates EBITDAL from its more common counterpart, EBITDA, is the special loss cost, which firms use to describe a non-recurring expense that they feel explains an unusually poor set of financial results.
  • Since EBITDAL is not a GAAP measure, the special losses factored into this figure are not defined by the Financial Accounting Standards Board (FASB).

Understanding Earnings Before Interest, Taxes, Depreciation, Amortization, and Special Losses (EBITDAL)

Earnings before interest, taxation, depreciation, amortization, and special losses (EBITDAL) is a variation of EBITDA, a commonly used non-GAAP accounting measure that many companies use as a proxy for net income. EBITDAL is essentially equivalent to net income with interest, taxes, depreciation, amortization, and losses added back into income. Each of these figures is intended to serve as an indication of a firm’s profitability and should not be confused with the company’s cash flows.

The deductions factored into EBITDAL can be grouped into three categories of operating costs plus one set of non-recurring costs. First are the financing costs which are manifest in interest payments. The second category captures accounting choices made by the company, which are reflected in taxes.

Finally, EBITDAL factors non-cash expenses associated with the aging of equipment and other assets. These appear as depreciation and amortization in a firm’s financial reporting. One additional cost differentiates EBITDAL from its more common counterpart, EBITDA. This is the special loss cost, which firms use to describe a non-recurring expense that they feel explains an unusually poor set of financial results.

Special Losses in EBITDAL

Since EBITDAL is not a GAAP measure, the special losses factored into this figure are not defined by the Financial Accounting Standards Board (FASB). The closest that FASB comes to describing these losses are the extraordinary and non-recurring items that the board allows firms to include in their income statements.

The distinction between extraordinary and non-recurring items can be a bit unclear in practice, and FASB guidelines require only that the two be reported differently for tax purposes. In effect, they serve the same purpose as special losses. They are treated as irregular expenses that analysts should not expect to recur in future reporting periods and should not be taken into account when projecting future earnings.

Special losses can range from the physical destruction wrought by a natural disaster to accounting losses brought on by a bad investment or unexpected retirement of an asset. A firm that loses an uninsured plant due to a catastrophic flood can generally claim that loss as a special item. It could also include the costs of a lost lawsuit in this category. A less tangible form of special loss could be a one-time write-down of a firm's goodwill due to some unforeseen negative event.