Impairment Losses, FCF Reconciliation

Hey all,

Just a quick question that boggled my mind today as I was not sure if I were at the right direction.

First of all, should we treat non cash charges such as goodwill impairment losses as non-operating? I've seen some financial statements which put this under EBITDA (if they show it) but above operating income, some do include in operating income. But for normalization purposes, should not we adjust it from the EBITDA if it is included, provided that it is a one time - expense?

And how are tax gains associated with it? As far as I am aware there no real tax gain from these losses, and a DTA is created. But I just was not sure how would I reconcile FCF, Net Income and CFO with these kind of impairment losses.

Here's a quick example. Let's ignore working capital, capex, and interest expense for a moment.

EBITDA=600 Depr= 100 Imp losses =200

Tax rate=20%

If impairment losses are treated non-operating (under EBIT), then my FCF=500 Net income=240

When reconciling from NI to EBITDA for FCF purposes, I should add (1-t) impairment losses right (due to they are non operating and are not included in EBITDA, similar to int expense) plus depr which leads to 500. That seems okay.

We are adding back depr in full because its tax savings are real and it is an operating non cash expense, but only adding back (1-t) imp losses since they are non operating. Would this thinking be correct?

But how do we get from CFO to FCF in this case. I mean if I consider these losses to be non-operating, where in CF statement do I have to make adjustments for them?

If I add back the full amounts to NI in CFO such as in Depr, then CFO would be 540. For double counting reasons that would mean I have to deduct tax shield associated with that I guess to reach 500, but I have hard time understanding this. So in general if an item is an non-operating non-cash expense, should I always add back (1-t) even in CFO? For the same reasons I described above?

I hope it was clear.

Thanks