Navigating Financial Adjustments: Understanding Their Impact on Valuation and Reporting for CEO's and CFO's

In today’s economic environment, where rising interest rates, shifting mark valuations, and cautious investor sentiment are shaping strategic decisions, companies are under more pressure than ever to present a clear and compelling financial picture. Whether you're preparing for a potential acquisition, securing financing, or responding to increased stakeholder scrutiny, how you report financial performance matters. 

At the center of this effort is the use of adjusted performance metrics — particularly those that aim to isolate core operating results. Adjustments made to standard metrics like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) are often necessary to reflect a company’s true, sustainable earnings potential. 

However, presenting these adjustments requires precision, consistency, and transparency. This guide is designed to help CFOs and CEOs navigate the practical considerations behind these financial adjustments, understand their impact on reporting, and ensure they’re presented in a way that builds trust with investors, lenders, and board members. 

What Are Financial Performance Adjustments? 

Financial performance adjustments are modifications made to earnings metrics to present a clearer view of a company’s core operating results. These are often used in internal reporting, board discussions, investor presentations, and most notably, in buy-side or sell-side due diligence. 

While performance metrics like EBITDA serve as useful baselines, raw numbers can include one-time events, non-operating items, or discretionary decisions that don’t reflect sustainable profitability. Adjusting for these outliers can help normalize performance and support a more accurate valuation. 

These adjusted metrics are often reviewed alongside GAAP-compliant financial statements and should always be reconciled transparently. 

Common Types of Adjustments in Financial Reporting 

Below are examples of frequently used adjustments, tailored for privately held companies. These adjustments are particularly relevant when evaluating performance across periods or preparing for external evaluations. 

1. Non-Recurring Items 

Costs or income that aren’t expected to repeat in future periods. These may include: 

• Restructuring charges 

• One-time consulting or legal fees 

• Insurance settlements 

• Gains or losses from asset sales 

Example: A company incurs $500K in legal fees related to a one-time acquisition. Adjusting for this expense helps isolate recurring operational performance. 

2. Discretionary Owner/Executive Expenses 

If an executive receives compensation significantly above industry benchmarks or if there are expenses incurred for personal benefit, these may be adjusted to reflect normalized salaries. 

Example: An executive receives $1.2M annually in a company where the market rate for that role is $750K. The excess amount could be adjusted downward for comparative benchmarking. 

3. Non-Cash Charges 

While necessary for GAAP, non-cash expenses don’t impact immediate cash flow. These may include: 

• Depreciation and amortization 

• Impairment losses 

• Stock-based compensation (depending on context) 

Example: A $3M goodwill impairment is recorded following a past acquisition. Since it doesn’t reflect ongoing performance, it may be excluded from adjusted earnings discussions. 

4. Unusual Operating Events 

Operational disruptions such as natural disasters, cyberattacks, or factory shutdowns that are unlikely to reoccur can justify adjustment. 

Example: A manufacturing plant is forced to halt production for a month due to a regional power outage. The resulting loss in revenue and temporary cost changes may be considered non-recurring. 

5. Start-Up or Expansion Costs 

Expenses incurred as part of launching a new product line or expanding into a new region that are not indicative of long-term performance. 

Example: Marketing costs associated with launching a new division may spike in the first quarter but normalize over time. 

Why These Adjustments Matter for CEOs and CFOs 

In fast-moving environments — especially during acquisitions, private equity investment, or IPO readiness — presenting financials that reflect the business’s true earning potential is crucial. Strategic buyers and investors are focused on recurring revenue, sustainable margins, and long-term cash flows. 

Properly adjusted metrics help: 

• Support valuation discussions 

• Enhance credibility with investors or lenders 

• Provide the board with a clearer view of performance 

• Facilitate internal decision-making and forecasting 

However, the key is consistency and documentation. Any adjusted figure must be reconciled to the audited financials, with a clear rationale and supporting evidence. Overuse of adjustments, or failure to explain them properly, can lead to mistrust — or worse, regulatory scrutiny. 

Best Practices for Presenting Financial Adjustments 

To ensure your financial adjustments are viewed as credible and not overly aggressive, follow these guidelines: 

• Be Transparent: Provide a clear reconciliation from GAAP net income to adjusted earnings. List all adjustment items separately and explain why they are excluded or modified. 

• Be Consistent: Use the same adjustment methodology across reporting periods and entities. 

• Be Conservative: Avoid including optimistic projections or overly subjective estimates. 

• Document Everything: Support each adjustment with evidence — contracts, invoices, benchmarking data, or third-party analysis. 

Financial reporting is not just about the numbers — it’s about the story they tell. A clear and well-supported narrative enhances stakeholder trust and positions the company for strategic growth. 

How Audits Reinforce Confidence 

CFOs preparing adjusted metrics for external use should also prioritize third-party assurance. A financial statement audit ensures that the foundation of your metrics — your GAAP financials — is solid. 

An audit provides an independent opinion on whether your financial statements are fairly presented. While adjusted metrics are not audited, an assurance engagement provides: 

• External validation of reported results 

• Confidence for lenders, investors, and buyers 

• A stronger internal control environment 

• Readiness for due diligence or public filing requirements 

BryMar’s Expertise in Financial Audit Services 

At BryMar, we understand what’s at stake when financial performance is under the spotlight. Whether you’re preparing for a strategic transaction, board presentation, or investor meeting, our team provides the guidance and assurance you need. 

We help companies: 

• Build a history of audited financial statement  

• Ensure proper disclosures and reconciliations 

• Deliver audit engagements with minimal disruption

• Make audits simple and fun  

We know the difference between what’s material and what’s noise — and we help you communicate that difference with confidence. 

Ready to Strengthen Your Financial Story? Let’s Talk. 

In today’s market, where buyers, lenders, and investors are exercising greater caution, the strength of your financial story can directly impact your company’s opportunities for growth. With capital harder to secure and valuations under closer scrutiny, adjusted performance metrics must be both accurate and defensible. 

At BryMar, we specialize in helping companies prepare for what’s next — whether that’s a strategic acquisition, funding round, or financial statement audit. Our experienced team works closely with CFOs and executive leadership to ensure your financial reporting strategically aligned with your business goals. 

Contact us today to schedule a consultation and learn how BryMar can support your next financial milestone with confidence.