E-commerce · Economics
Seller add-back quality
Published · Reviewed by The Diligence Standard Team · Updated
An add-back belongs in normalized earnings only if it is identifiable, nonrecurring and unnecessary under buyer ownership.
Records to reconcile
- Ledger transactions
- Contracts and payroll
- Replacement-cost evidence
Warning signal
Recurring tools, labor, advertising or owner functions are labeled discretionary.
Transaction impact
SDE and valuation may be overstated.
Response
Classify each add-back and include replacement cost where the function continues.