Earnings adjustments

Seller Add-Backs

An add-back is only valuable when the expense is identifiable, supportable and genuinely unnecessary under the buyer’s expected operating model.

Buyer lens

Trace every material add-back to the ledger and ask whether the cost truly disappears after closing.

Seller lens

Remove weak adjustments before the buyer does and make every remaining adjustment easy to verify.

Why it matters

  • Aggressive recasts can inflate both earnings and purchase price.
  • One-time does not always mean non-recurring.
  • Owner expenses can be discretionary while owner labor remains economically necessary.

Evidence to reconcile

  • Add-back schedule
  • General-ledger detail
  • Invoices/receipts
  • Payroll and owner roles
  • Historical recurrence by account