Normalisation and Adjusted EBITDA in statutory financial reporting

Reporting Support

By breaking out non-operational, non-recurring and/or non-recurring items from the statutory EBITDA figures, finance leaders can present a normalized view of operating performance in the MD&A or director’s report (German: Lagebericht). These adjustments may also support valuation discussions and improve transparency around the company’s underlying operating performance.

However, normalization is not a “one-size-fits-all” exercise. It requires careful classification, robust documentation, and clear supporting rationale.

Key Areas

Based on established practice and audit expectations, adjustments usually fall into three categories. These categories are commonly applied in transaction and reporting practice across IFRS, HGB and Swiss GAAP FER, and Swiss CO reporting environments, although the accounting treatment and presentation of individual items may differ between frameworks.

1. Non-operating or owner-related items

• Examples: Management fees or sponsor charges that are specific to the current ownership structure, owner’s personal expenses, donations or sponsorships unrelated to business, dividend income.

• Rationale: These items are not reflective of day-to-day commercial activity and would not persist under institutional ownership.

2. Non-cash or valuation-related items

• Examples: Unrealized gains or losses, fair value adjustments or exceptional credit loss provisions. Examples also include temporary inventory step-ups arising from purchase price allocations, which can increase cost of sales during the first post-acquisition reporting periods. Also, impairment charges or acquisition-related valuation adjustments may require separate assessment where they are non-cash in nature and not reflective of recurring operating performance.

• Rationale: These items may affect comparability of operating performance across periods and often arise from valuation methodologies, acquisition accounting or non-cash accounting adjustments rather than recurring operational activities.

3. Non-recurring items

• Examples: One-time litigation, restructuring costs, M&A advisory fees, interim management costs during post-acquisition integration, carve-out transition costs, rebranding campaigns, ERP implementation, system migrations, cybersecurity incidents, flood-related expenses, fraud write-offs, or other project-specific transformation costs. This category may also include transaction and integration costs such as due diligence fees, success fees, temporary post-acquisition advisory support or carve-out implementation projects. Buyers, lenders and auditors will generally expect clear evidence that these costs are temporary, identifiable and not part of ongoing operations. Also, Interim management costs incurred during the post-acquisition integration phase, where these are temporary in nature and not expected to continue as part of the long-term operating structure.

• Rationale: These items are specific to an event or project, not representative of recurring operations.

Best Practices

Auditors and buyers typically scrutinise “EBITDA add-backs” unless clearly justified. Best practices include:

• Classification Framework: Assign each adjustment to a defined bucket (non-operating, non-cash, non-recurring).

• Evidence: Attach supporting documents (contracts, invoices, settlement agreements) and link directly to GL entries.

• Narrative: Explain why the cost is extraordinary and why it will not recur.

• Quantification: Show exact amounts by account code, tie them to the trial balance, and reconcile back to reported EBITDA.

• Audit Trail: Maintain a memo that is consistent across transactions, lenders, and auditors.

• Attestion: Have the adjusted EBITDA figures that are presented in your MD&A or director’s report (Lagebericht) attested by your auditor.

Considerations

For CFOs and finance teams, the advantage of preparing an EBITDA bridge early is that the rationale and supporting evidence can already be reviewed, challenged and attested during the statutory audit process rather than during active transaction negotiations. This may help reduce delays, rework and/or disputes during the exit preparation and/or financial due diligence process.