How to properly calculate EBIT from this?

CFA General
#1

Hello everyone, hope you’re all having a great day. I am currently analyzing a company’s financial statements and trying to calculate EBITDA and EBIT. I just want to know if I am approaching correctly, and get your input on my calculations. So here’s the income statement (expressed in millions) that I copied from the company’s filings into Excel:

The company reports using IFRS.

The way the company calculates EBITDA is: Net Income + Total Taxes + Other expenses + Net unrealized gains/losses on derivative fin. instruments + Interest expense + Restructuring Costs + Total Amortization So for 2015 for example, EBITDA was $35,518.

The EBIT calculation however confuses me. For example, look at 2015… they subtract interest expense to get to operating income (EBIT). I thought EBIT was before accounting for interest expense? So shouldn’t 2015 EBIT be $26,967 (22,120 + 4,847), therefore arriving at (still the same) 2015 EBITDA of $35,518 (26,967 + 5116 + 3435). Wouldn’t I have to adjust the EBIT calculation in order for me to compare it to other peers? Since peers don’t have interest expense subtracted to arrive at EBIT. How would you approach this? Thank you everyone, I appreciate all your help!

#2

A few observations:

  • Without seeing the filing, I would guess that the company calls what you are referring to EBITDA as something like “Adjusted EBITDA” since they are removing other other items. I am always suspicious of non-GAAP measures like this.
  • They are reporting Earnings Before Income Taxes, not Earnings Before Interest and Taxes. That is why they are not removing Interest Expense
  • You can more easily comapre EBIT and EBITDA across companies than any sort of “Adjusted EBITDA” figures like this company appears to be reporting. And yesm you would want to remove interest expense for EBIT.