Adjusting for Covid: Introducing EBITDA-C Since the start of the COVID-19 crisis, Calcbench has been watching corporate disclosures to see what firms have been saying about the virus’ effect on earnings.

Now one of our comrades-in-arms — Olga Usvyatsky, a doctoral student in accounting at Boston College and a long-time whiz at financial disclosures — has worked up a more thorough analysis of how firms are adjusting for Covid-19 costs. Call it EBITDA-C: earnings before interest, taxes, depreciation, amortization, and coronavirus.

Usvyatsky used our Interactive Disclosures page to search for “COVID-19 related expenses” in Q1 corporate filings. She found more than 40 companies that had included covid costs as a separate line in the adjusted EBITDA or adjusted net income reconciling tables.

You can download Usvyatsky’s paper here, and find the data file on the Calcbench Research Page. For anyone curious about accounting for coronavirus, her paper is worth your time. Meanwhile, let us recap a few of her major themes here.

First, many companies said the adjustments were directly, clearly related to pandemic expenses: buying personal protective equipment, cleaning supplies, or extra IT equipment to help employees work from home. The median adjustment in Usvyatsky’s sample was $1.2 million.

Second, not all companies reported COVID-19 charges as adjustments to net income. AT&T ($T), for example, noted in an 8-K filing that its coronavirus costs were likely to nick earnings by about $0.05 per share.

Third, some firms reported charges that were more sweeping than equipment purchases, but could still be reasonably construed as covid-specific costs. For example, if a firm laid off 20 percent of its staff, complete with compensation costs and other restructuring charges — well, companies adjust net income for restructuring charges all the time. Pandemics can be the cause of a one-time restructuring charge as much as any other economic disaster is.

Remember the Non-GAAP Rules

These adjustments for coronavirus raise an obvious question: “Um, can companies do that?”

As Usvyatsky explains — yes, generally companies can. Adjustments away from Generally Accepted Accounting Principles (GAAP) are known as non-GAAP metrics, and they can play an important role in helping a company explain its financial position to investors. Non-GAAP metrics do, however, need to pass a few SEC rules:

  • They must be reconciled to their closest counterpart in GAAP;
  • The company must explain why it believes its non-GAAP metric conveys some useful piece of information;
  • Non-GAAP metrics cannot be displayed more prominently, such as in a large headline that eclipses worse GAAP metrics buried in fine print.

In that case, one can reasonably argue that numerous COVID-19 costs fit within those parameters. For example, a large one-time purchase of protective equipment or IT gear, that you’re never likely to make again in future periods — that’s an unusual, specific, one-time cost. You can identify it as an adjustment to GAAP-approved net income and reconcile it back to the GAAP number.

On the other hand, a company can only report so many unusual, one-time expenses before investors start to call shenanigans. We all hope COVID-19 is a temporary phenomenon, but it may well turn out to be a problem that haunts the world for years. So if a firm ends up buying fresh protective gear every quarter for two years running, declaring that as a non-GAAP adjustment seems kinda fishy.

Anyway, Usvyatsky’s paper covers all this and more, with numerous specific examples. So if coronavirus disclosures are your thing, we recommend her paper highly.


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