October 19, 2021

IASB Chairman Not Giving EBITDA the Time of Day

The International Accounting Standards Board thinks it's high time that we all got back to basics. Too much of this non-GAAP nonsense has people thinking they can just throw some numbers around and put labels on 'em. Well, IASB chairman Hans Hoogersvorst, for one, is ready to tighten things up a bit:

The IASB, which sets International Financial Reporting Standards, is considering adding definitions of commonly used accounting terms, as well as guidance on the formatting of financial statements, Mr. Hoogervorst said. The move comes in response to the proliferation of custom metrics in both U.S. and international financial reporting that regulators and standard setters say are often misleading.

“We believe that we have to try to create a little bit of order in this chaos,” Mr. Hoogervorst said.

Speaking of those custom metrics, don't even think about asking Hans to address those. He doesn't care how popular they are:

However, not all non-standard accounting terms deserve to be rigorously defined, Mr. Hoogervorst said. For example, earnings before interest, tax, depreciation and amortization or EBITDA is an inherently  misleading measure that Mr. Hoogervorst said he wouldn’t want to define.

“I wouldn’t want to legitimize it,” Mr. Hoogervorst said. “Depreciation and amortization are very real costs and I don’t think they should be left out of the analysis,” he added.

Hear that, EBITDA? You are not welcome.

[WSJ]

Image: Sebastiaan ter Burg/Wikimedia Commons

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