Earnings Before Interest, Taxes, Depreciation, Amortization, Losses (EBITDAL)

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Updated December 01, 2023
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Earnings Before Interest, Taxes, Depreciation, Amortization, Special Losses (EBITDAL)

Investopedia / Dennis Madamba

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

Earnings before interest, taxes, depreciation, amortization, and losses (EBITDAL) is a non-GAAP measure of a company's income that takes into account special losses that it 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, taxes, depreciation, amortization, and losses is a non-GAAP measure of a company's income that takes into account special, or extraordinary, losses that it does not expect to occur on a regular basis going forward.
  • The additional cost that differentiates EBITDAL from its more common counterpart, EBITDA, is the special loss cost, which companies use to describe a non-recurring expense that they believe can explain an unusually poor set of financial results.
  • A special loss might, for example, be a bad investment or involve the destruction of a factory due to a natural disaster.
  • Since EBITDAL is not a GAAP measure, the types of special losses that may be factored into this figure are not defined by the Financial Accounting Standards Board (FASB).

How Earnings Before Interest, Taxes, Depreciation, Amortization, and Losses (EBITDAL) Works

Earnings before interest, taxes, depreciation, amortization, and losses (EBITDAL) is a variation of EBITDA, a commonly used non-GAAP accounting measure that some companies report as a proxy for profitability.

EBITDA is essentially equivalent to net income with interest, taxes, depreciation, and amortization added back in. In addition to those costs, EBITDAL incorporates any special or extraordinary losses during that reporting period—that is, non-recurring expenses that the company believes can help explain a worse than expected set of financial results.

Other common measures, in addition to EBITDA and EBITDAL, include EBITA (which excludes depreciation from its formula) and EBIT (which excludes amortization, as well). EBIT is also referred to as operating income, meaning the income the company brought in before taxes and financing costs were applied. Earnings, the "E" in all of these measures, refers to a company's revenue minus its expenses.

Defining 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 rule-setting body for GAAP. The closest that FASB comes to describing these losses are the extraordinary and non-recurring items that it allows companies 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 like a flood or fire to accounting losses brought on by a bad investment or the unexpected retirement of an asset. A company 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 company's goodwill due to some unforeseen negative event.

What Is GAAP?

GAAP is an acronym for Generally Accepted Accounting Principles, an ever-evolving set of accounting rules that publicly traded companies in the United States are required by law to follow in their financial reporting. Former Securities and Exchange Commission (SEC) Chair Mary Jo White has credited them with forming "the bedrock of the U.S. financial reporting system."

While GAAP is mandatory in the U.S., a competing set of rules, the International Financial Reporting Standards (IFRS), is in wider use worldwide, and efforts to consolidate the two have been in the works for some time. The IFRS rules are set by the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB).

Meanwhile, some companies, particularly those with an international presence, follow both sets of rules in their financial reporting. Companies may also use non-GAAP reporting measures, in addition to GAAP-compliant ones, when they believe doing so will more clearly convey their financial picture. However, the SEC cautions that non-GAAP measures can be misleading.

What Is the FASB?

The FASB, or Financial Accounting Standards Board, is an independent, not-for-profit organization that describes itself as "the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP)." Founded in 1973, it is based in Norwalk, Connecticut.

What Is EBITDA?

EBITDA—for earnings before interest, taxes, depreciation, and amortization—is a common non-GAAP measure of corporate profitability. It is calculated by adding interest, taxes, depreciation, and amortization back to net income. Some companies report an adjusted EBITDA, which modifies their EBITDA to account for certain one-time expenses or anomalies, such as corporate bonuses that exceed the norm for that type of business. One goal of adjusting EBITDA is to make that company more directly comparable to others in its industry in terms of its performance.

What Are Depreciation and Amortization?

Depreciation and amortization are common accounting practices that allow a company to write down the value of certain assets on its books over their expected useful life. Depreciation applies to tangible assets, such as a piece of machinery or computer system, while amortization applies to intangible ones, such as trademarks, patents, or goodwill.

The Bottom Line

Earnings before interest, taxation, depreciation, amortization, and losses (EBITDAL) is one way of looking at a company's profitability. Unlike other measures, it takes into account certain losses that the company does not expect to occur again in the future. Because EBITDAL is not a measure that complies with Generally Accepted Accounting Principles (GAAP), companies may determine it in their own way and, like other non-GAAP measures, it could be misleading to investors and others.

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  1. U.S. Securities and Exchange Commission. "A U.S. Imperative: High-Quality, Globally Accepted Accounting Standards."

  2. IFRS Foundation. "About Us."

  3. U.S. Securities and Exchange Commission. "Non-GAAP Financial Measures."

  4. Financial Accounting Standards Board. "Standards."