Why do we add back amortisation of goodwill to adj ebit?
Some investment banks add back "amortisation of goodwill" when calculating adj ebit? what is the reason for this? In what instances should it be adjusted and when should it not be adjusted? It is a noncash item, so i would assume it is added each time.
Is amortisation of goodwill always part of the D&A (A), or is it generally separate?
Depreciation -> Tangible Assets Amortization-> Intangible Assets
Goodwill->Intangible asset
As a reminder, goodwill is the result of an acquisition at a premium. No transaction = no good will. If there is no impairment to goodwill, it can remain on the balance sheet fo'evah...
More intangible assets: Loan doc fees, debt issuance costs, patents, zoning fees, customer lists, and so on. Other intangibles such as patents and customer lists can be purchased. These usually have finite lives
You must be looking at some old statements since goodwill is no longer 'amortised'. It is tested for impairment once per year, and an impairment expense is charged if the book value of goodwill is judged to exceed its fair value. This impairment is always added back to EBIT / EBITDA because it is i) a non-cash expense and ii) a non-recurring item.
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