Difference between EBITDAR and Post-IFRS16 EBITDA
Hello, everything is in the title :)
Can’t understand the difference between both. It looks like that according to CAPITAL IQ, they are the same for US GAAP companies (both functions result in the same values) but differ for IFRS companies.
Since IFRS16 considers no lease at all, it should be equal to EBITDAR, no? Why would values differ for IFRS companies then?
Thanks for your help
You should use the lease-adjusted EBITDA formula for post-IFRS 16 / EBITDAR comparisons. The CIQ pull for EBITDAR is the pre-IFRS 16 EBITDA plus Rental Expense. For US GAAP companies, the two will be equal because it's just a matter of adding the reported operating lease / rental expense. They should also theoretically be equal for IFRS 16 companies, but there's no reported rent expense for CIQ to calculate EBITDAR in this way.
If CIQ is making an adjustment in the EBITDAR bridge, it's because the company has lease expenses for short-term leases (less than 1 year) or low-value assets (generally less than $5,000). These leases are exempt from the IFRS reporting requirement, so they're just straight lined and not reported on the balance sheet like other leases - however, they are captured by CIQ as "Rental Expense" and this is what is getting added back.
Thanks a lot for your help, I think I get the idea. Could I have a digital example just to be sure I understood properly? Thanks again
You can verify this pretty easily if you hit audit on IQ_EBITDA, IQ_EBITDA_LEASE_ADJUSTED, and IQ_EBITDAR for an IFRS company.
IQ_EBITDA is supposed to be pre-IFRS 16 EBITDA but not quite for IFRS companies because of lease classifications. For IFRS companies, it doesn't add back any lease-related payments including for "finance leases" which makes it incomparable between IFRS and US GAAP companies.
IQ_EBITDA_LEASE_ADJUSTED is IQ_EBITDA + IQ_LEASE_ADJUSTMENT_EBITDA, which is depreciation on ROUs for IFRS companies and rent expense for US GAAP companies. This is the correct figure to use for EBITDAR.
IQ_EBITDAR is IQ_EBITDA + IQ_NET_RENTAL_EXP_FN, which is the disclosed lease expenses mentioned previously for IFRS companies and rent expense for US GAAP. This does not result in a proper EBITDAR for IFRS companies.
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