Is EBITDA a Management-Defined Performance Measure? Not If It Matches IFRS 18's Own Subtotal, Yes If It Differs and Is Published, Tested on Gulf Companies

IFRS 18 never defines EBITDA, yet it exempts one EBITDA-shaped figure: operating profit or loss before depreciation, amortisation and impairments within the scope of IAS 36, item (b) on paragraph 118's list of subtotals that are not management-defined performance measures (MPMs). Built exactly that way, EBITDA needs no note. Start it from a line that includes interest income, or add back a restructuring charge, and once it appears in a results release it is an MPM, reconciled in the audited notes with the income tax and non-controlling interest (NCI) effect of each reconciling item.

The Gulf's early adopters show both outcomes. du's first-quarter 2026 statements present what is, by our reading, the exempt subtotal with no MPM note; Parkin and RAK Ceramics each reconcile an EBITDA as an MPM in their half-year 2026 interims. For everyone else the standard applies to annual periods beginning on or after 1 January 2027.

What IFRS 18 says about EBITDA, and what it does not

The IASB's Project Summary of April 2024 sorts the figures: operating profit and the 118(b) subtotal are "IFRS-specified"; adjusted profit and adjusted EBITDA are its examples of MPMs. Nor is EBITDA the same as operating profit, which IFRS 18 strikes after depreciation, amortisation and impairment and, for most companies, before investing income such as deposit interest and associates; "earnings before interest and tax" sits closer to profit or loss before financing and income taxes (paragraph 69(b)).

Paragraph 118 exempts six subtotals: gross profit and similar subtotals such as net interest income (B123); the 118(b) subtotal; operating profit plus all equity-accounted income; operating profit plus investing items for an entity applying paragraph 73; profit before income taxes; and profit from continuing operations. SOCPA's endorsement of 26 December 2024 left the other MPM paragraphs as issued and relabelled 118(e) "profit or loss before Zakat and income taxes".

The MPM test as five questions

Paragraph 117's definition, as questions in order:

Question	Paragraphs	Answer that ends the test
A subtotal of income and expenses?	117, B116 to B117	No: free cash flow, net debt, ratios
Used in public communications?	117(a), B119 to B122	No: internal use, earnings calls
About the entity as a whole?	117(b), B114 to B115	No: most segment measures
On the 118 list, or required by IFRS?	117(c), 118, B123	Yes: exempt
Presumption of management's view rebutted?	119 to 120, B124 to B131	Yes, with evidence on both limbs

Rebuttal needs reasonable and supportable evidence both that the subtotal is not management's view (little prominence, no internal use) and that something else explains publishing it, such as a regulator's requirement or an outside party's request (B124 to B129). A ratio is never an MPM, but its numerator can be (B117).

Ten measures Gulf companies publish, tested

Measure and filing	MPM?	Why
du, "Operating profit before depreciation and amortization", face, first quarter 2026	No, on our reading	Its depreciation line also carries impairment of property, plant, equipment and intangibles (note 16)
Parkin, "EBITDA", half-year 2026, note 31	Yes, as reported	Built from profit before financing and income tax, so it includes interest income
RAK Ceramics, "EBITDA adjusted for extra-ordinary gains or losses", half-year 2026, note 30	Yes, as reported	Removes disposal gains
SAB, "net operating income before impairment provision", nine months to 30 September 2026	SAB is assessing it	Not on the 118 list; presumed an MPM if published
SAB, "Net special commission income", face	No	Net interest income, B123(a)
Profit before zakat and income tax, Saudi statements	No	118(e) as endorsed by SOCPA
Adjusted net profit	Yes, if published	Management adjustments
Free cash flow, net debt, gearing	No	Not subtotals of income and expenses (B116)
Pro forma or run-rate EBITDA	It can be	June 2026 tentative decision
Segment EBITDA	Usually no	Only if it speaks for the whole entity (B114 to B115)

None of this is a finding of non-compliance. du's label omits impairment (paragraph 43 wants faithful labels); Parkin (AED 448.5 million for the half-year) and RAK (AED 284.8 million) show no tax effects, and RAK no NCI effects, though RAK defines "extra-ordinary" as B135(b) expects. ESMA reads B123 strictly, so SAB's measure is a live question.

Public communications: what counts, and the June 2026 tentative decisions

B119 counts management commentary, press releases and investor presentations, not oral communications, their transcripts or social media posts: EBITDA spoken on an earnings call is not caught, the same figure on the results slide is. A measure used only at the half-year is an MPM only in the interim statements (B120).

On 16 and 17 June 2026 the IFRS Interpretations Committee reached three tentative agenda decisions on MPMs: a private entity's presentations shared with a few identifiable shareholders or potential investors under confidentiality and no-redistribution agreements are not public communications; a measure including income and expenses never recognised, a pro forma figure for example, can be an MPM; and an MPM's label need not list everything it excludes. Comments closed on 9 September, the September 2026 Update did not finalise them, and the Committee meets next on 24 and 25 November 2026: as at 3 November 2026 all three are tentative. By the first decision's reasoning, a lender pack sent privately to banks creates no MPM (our inference); covenants are covered in Loan Covenants and Bonus Plans After IFRS 18.

Why the IASB would not define EBITDA, and how ESMA and the SEC treat the label

Proposing the standard, the Board declined to define EBITDA because users have no consensus on what it represents and its calculation is diverse, and refused to call operating profit before depreciation and amortisation "EBITDA" because operating profit excludes investment and associate income. An October 2021 staff paper found 72 of 85 non-financial companies using EBITDA-type measures in 2018 to 2019.

ESMA's statement of 17 February 2026 lets issuers call the 118(b) subtotal EBITDA only if the label is accurate, for example with no investing-category items and no interest income in operating; on our reading of that test, du, with interest income and associates in its investing category, could not. Under the SEC's C&DI 103.01, EBITDA starts from net income, and anything calculated differently needs another name, such as "Adjusted EBITDA".

Company A's MPM note: from adjusted EBITDA 263 to operating profit 186

Company A, the Saudi industrial in IFRS 18 vs IAS 1, charges depreciation and amortisation of 60, a goodwill impairment of 10 and a one-off restructuring of 7 in operating expenses; its results release shows adjusted EBITDA of 263. Operating profit 186 + 60 + 10 = 256 is the 118(b) subtotal, and the 7 makes 263 an MPM. B140 lets the note reconcile to 256, which is not on the face, then bridge 256 to operating profit without disclosing tax or NCI effects.

Reconciliation	Amount	Income tax effect	NCI effect
Adjusted EBITDA (MPM)	263
Restructuring, general and administrative	(7)	0.56	Nil
Operating profit before depreciation, amortisation and IAS 36 impairments	256
Depreciation and amortisation	(60)	Not required (B140)	Not required
Goodwill impairment	(10)	Not required (B140)	Not required
Operating profit	186

Tax uses B141's statutory-rate method: Saudi income tax of 20% falls only on the 40% of profit owned by non-Saudi shareholders, so 7 x 20% x 40% = 0.56. B141 also allows a pro rata allocation or another more appropriate method; the note states which (123(e)). With no non-controlling interests the NCI column reads nil; in a partly owned subsidiary it would be the minority's share of the item after tax.

The zakat question

Whether the 0.56 should include zakat is open: SOCPA put zakat in the "Zakat and income taxes category" but left 123(d) and B141 as issued, and zakat is not an income tax under IAS 12. On 21 July 2026 the IASB tentatively decided, 11 of 12, to propose disclosing for each reconciling item the effect of other tax charges in the income taxes category; whether zakat qualifies turns on the exposure draft, expected in the fourth quarter of 2026 and unpublished on 3 November 2026. Meanwhile, state the reading applied.

Interim reports

IFRS 18 paragraph 5 applies paragraphs 117 to 125 to condensed interim statements, and IAS 34 paragraph 16A(m) requires the MPM disclosures, so a calendar-year company's first MPM note appears in its first 2027 interim report, usually reviewed rather than audited.

What changes for the auditor

Under IAS 1, adjusted EBITDA sat outside the statements: ISA 720 reaches only the annual report (paragraph 12), where the auditor reads it for material inconsistency without auditing it (paragraphs 2 and 14). In an IFRS 18 note it is audited, which by our reading brings four things into scope: whether the MPM list is complete against every public communication, including later results presentations (B121); the evidence for any rebuttal; the tax and NCI effects; and the labels. ESMA's statement points to a disclosure policy spanning reporting, investor relations and legal, early talks with auditors, and fewer redundant measures.

Where to practise this

IMA's CMA (Certified Management Accountant) tests the measure, not the standard: Part 2, Section A Financial Statement Analysis (20%), LOS A.2.p (EBITDA margin) and A.4.e (earnings quality), as the CMA Part 2 study guide sets out. The CPA's BAR Area I (40 to 50%), Group A, Topic 2 covers non-GAAP measures including EBITDA up to Analysis, with no IFRS in the 2026 Blueprints (BAR study guide). SOCPA's Financial Accounting subject places presentation in main topic 1 (5 to 15%), group 1/7 "Presentation and disclosure", at Application; it examines IFRS as endorsed in the Kingdom, and SOCPA has not announced which cycle first examines IFRS 18.

Prepito's Financial Accounting course and BAR course have practice questions. The CMA Part 2 course opens soon; see the CMA programme. For EBITDA ratios, read Financial Ratio Analysis; for the early adopters' full statements, IFRS 18 in Gulf Filings.

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Sources: IFRS 18, paragraphs as in AASB 18; IASB Project Summary and staff paper; IFRIC Updates, June and September; IASB Update, July and tax charges project; SOCPA's endorsement document, ISA 720 and guidance framework; ESMA; SEC C&DIs; filings of du, Parkin, RAK Ceramics and SAB; IMA LOS; CPA Blueprints. Status as at 3 November 2026; check ifrs.org for the June decisions and the zakat amendment before relying on them.