OIBDA
Encyclopedia
OIBDA is an acronym meaning operating income before depreciation and amortization. It refers to an income calculation made by adding depreciation
and amortization
to operating income.
OIBDA differs from EBITDA
because its starting point is operating income, not earnings. It does not, therefore, include non-operating income, which tends not to recur year after year. It includes only income gained from regular operations, ignoring items like FX changes or tax treatments.
Historically, OIBDA was created to exclude the impact of write-downs resulting from one-time charges, and to improve the optics for analysts comparing to previous period EBITDA. An example is the case of Time Warner
, who shifted to divisional OIBDA reporting subsequent to write downs and charges resulting from the company's merger into AOL
.
In each case OIBDA, OIBTDA, and EBITDA are proxies for analyzing the cash a firm can generate from operations irrespective of capital structure and taxes, and is therefore very useful as a tool in designing restructurings, mergers and acquisitions, and recapitalizations, and for valuing firms on a TEV (total enterprise value) basis.
Depreciation
Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....
and amortization
Amortization
Amortization is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death.When used...
to operating income.
OIBDA differs from EBITDA
EBITDA
EBITDA is an acronym for earnings before interest, taxes, depreciation, and amortization. It is a non-GAAP metric that is measured exactly as stated. All interest, tax, depreciation and amortization entries in the income statement are reversed out from the bottom-line net income...
because its starting point is operating income, not earnings. It does not, therefore, include non-operating income, which tends not to recur year after year. It includes only income gained from regular operations, ignoring items like FX changes or tax treatments.
Historically, OIBDA was created to exclude the impact of write-downs resulting from one-time charges, and to improve the optics for analysts comparing to previous period EBITDA. An example is the case of Time Warner
Time Warner
Time Warner is one of the world's largest media companies, headquartered in the Time Warner Center in New York City. Formerly two separate companies, Warner Communications, Inc...
, who shifted to divisional OIBDA reporting subsequent to write downs and charges resulting from the company's merger into AOL
AOL
AOL Inc. is an American global Internet services and media company. AOL is headquartered at 770 Broadway in New York. Founded in 1983 as Control Video Corporation, it has franchised its services to companies in several nations around the world or set up international versions of its services...
.
In each case OIBDA, OIBTDA, and EBITDA are proxies for analyzing the cash a firm can generate from operations irrespective of capital structure and taxes, and is therefore very useful as a tool in designing restructurings, mergers and acquisitions, and recapitalizations, and for valuing firms on a TEV (total enterprise value) basis.