EBITDA adjustment evidence checklist
The checklist below is a practical review workflow, not a list of automatically permitted add-backs. Start by identifying the purpose: a management view, a transaction analysis, a public disclosure or a calculation under an executed credit agreement. An adjustment accepted for one purpose may not belong in another.
Build one evidence packet per item
Give every proposed adjustment a unique reference. Keep the calculation and source documents together, with an owner and a reviewer. A reader should be able to reproduce the number without relying on the person who proposed it.
| Test | What to document | A useful challenge |
|---|---|---|
| Source tie-out | GL accounts, transaction dates, invoices or payroll records; reconciliation to the period total. | Is the amount actually included in the starting EBITDA? |
| Signed treatment | Whether the proposal removes a cost, removes income, or introduces a missing cost. | Should this reduce earnings rather than increase them? |
| Recurrence | Comparable costs and gains in earlier periods, the reason for the event and any ongoing obligation. | Does the same economic cost recur under a different description? |
| Replacement economics | The activity that stops and the expense needed to replace it. | Would the business still need a person, facility or service after the adjustment? |
| Period and perimeter | Dates, entities, currency, allocation basis and any partial-period assumptions. | Are we mixing historical normalization with a future run rate? |
| Overlap | References to related items, acquisition schedules and the starting reconciliation. | Has this benefit already been captured somewhere else? |
| Decision | Accepted, disputed or excluded; reviewer, date and unresolved questions. | What additional evidence would change the conclusion? |
Challenge the story, not just the invoice
An invoice establishes that a cost occurred. It does not establish that the cost should be removed. BDO’s transaction advisory discussion emphasizes supporting documentation and the economic context—for example, whether a role associated with severance was subsequently replaced. It also notes that normalization can move earnings in either direction. Read BDO’s transaction advisory discussion.
For a severance proposal, a useful review packet therefore includes the recorded expense, employees affected, termination timing, replacement hiring and any overlap with compensation savings. For an owner-compensation proposal, compare historical compensation with the fully loaded cost of performing the same work after the transaction. Removing all compensation while retaining the role overstates the benefit.
“Nonrecurring” is a conclusion to support. The SEC’s public-company guidance treats expenses that recur occasionally or irregularly as recurring and warns about removing normal recurring cash operating costs. Those rules have a specific reporting scope; private transaction analysis still needs its own explicit rationale. SEC question 100.01.
Prevent double counting with a shared reference
Suppose a fictional business records $120,000 of integration consulting. One schedule lists it as a transaction expense; another includes the same invoices in an integration initiative. Assign those invoices to one adjustment reference. A second presentation may point to the first, but it should not add another $120,000.
Also check whether an expense was already excluded from the starting EBITDA. If the reported measure is already adjusted, rebuilding another add-back schedule on top of it can repeat the same adjustments. Preserve the starting reconciliation and state exactly where the new bridge begins.
Leave a clean handoff
Export the bridge with a dated period label. Keep disputed items in a separate sensitivity and record the missing evidence. The bridge tool lets you make that distinction without deleting a proposal from the record. Use QoEKit to organize the broader diligence requests and PEClose to improve the reliability of the source close.
An adjustment schedule is one part of the analysis. Receivables, revenue recognition, working capital and cash conversion still deserve separate attention.
Sources and scope
- SEC, Non-GAAP Financial Measures interpretations — public-company reporting context and recurring expenses.
- BDO, Purchase Price Wars: EBITDA vs. Adjusted EBITDA and Why It Matters — transaction normalization and supporting evidence.
The checklist and fictional examples are editorial guidance by Seth Sokoloff. They do not determine contractual eligibility or replace professional diligence. Reviewed October 11, 2026.
Put the review into practice
Build your own signed scenario, preserve disputed items and export the result.
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