One-time expense (non-recurring expense)
A one-time expense, also called a non-recurring expense, is a cost not connected to the core operating profit of a business, such as a legal settlement. In an adjusted or normalized EBITDA, such items may be adjusted for.
A one-time expense is a cost that sits outside the ordinary running of a business. You may meet the term in a seller’s financial package or in a buyer’s or lender’s review of earnings. BDC explains that bankers, valuators and others sometimes modify the EBITDA formula into an adjusted (also called normalized) EBITDA, and that the main objective is to adjust for one-time and extraordinary items not connected to the core operating profit.
What BDC lists as examples
- Non-recurring income or expenses
- Legal fees and settlements
- Insurance claims
- Non-market rent
What to ask
BDC says a bank valuing a business typically asks for a list of discretionary and non-recurring or one-time expenses. A cost the seller calls one-time is a claim to test, not a fact. Ask for the invoices behind each item and whether a similar cost appeared in earlier years. Read which add-backs hold up and the entry on add-backs. The sources used here show no difference between provinces.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is EBITDA?
- 02Business Development Bank of CanadaGovernmentHow to value a business you’d like to acquire
- 03Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
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