If a company has inventory variances at year ends, how would you treat these from an ebitda perspective? It’s unknown which period it should be pushed back to and mgmt is stating that these are non recurring. In what cases would an addback make sense?

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Inventory overstatement leads to understated COGS (and overstated EBITDA), while inventory understatement does the opposite.

From a QoE perspective, I’d first assess whether the variance stems from timing or true non-recurring errors. If management performed a physical count at year-end, you could ask them to perform a similar count (or provide count results) for the FDD historical period. The difference between the adjusted and reported balances would flow through COGS as the EBITDA impact.

An add-back could make sense if the variance relates to one-time issues such as a write-off from a system conversion, a physical count correction after years of misstatements, or a non-recurring loss (e.g., theft, obsolescence clean-up, or accounting policy change). But if variances recur year to year due to weak controls or cycle counts, they’re operational and shouldn’t be adjusted.

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It depends.

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this is the level of detail i come to expect from a GT QoE

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