Legitimate add-backs must be:
- Clearly documented with supporting evidence (e.g., invoices, contracts, payroll records, etc.).
- Non-recurring and unlikely to happen in the future (e.g., a one-time legal settlement).
- Unrelated to the actual core operations of the business.
Aggressive or inappropriate add-backs often lack clear justification or documentary support, are extremely subjective, or recur regularly as part of the Company’s normal operations. Examples might include overly optimistic cost-saving projections or speculative future revenue increases, or bad debts, which do not happen often but that still occur each year.
