Reconcile adjustments without counting the same effect twice

Start with the reported source and one named group

The synthetic reported model has revenue EUR 1,000, COGS EUR 750 and SG&A EUR 100. EBITDA is EUR 150. There is no D&A, capex or operating working capital; tax is 25%. Create one named analytical adjustment group and document why the source items differ from the desired analytical basis. These synthetic adjustments are not an audited performance measure.

Apply the group only to 2027: revenue −400; COGS target 75% of adjusted revenue; and a separate direct EBITDA increase of 50. The source model remains reported. An adjusted view is an explicit alternative calculation.

Follow the linked cost effect and sign convention

Adjusted revenue is 600. The cost target is 75% × 600 = 450, so the cost adjustment is 450 − 750 = −300 in the positive-expense input convention. The native statement stores COGS as −750 reported and −450 adjusted; the resulting EBITDA contribution is therefore +300.

Revenue contributes −400 and COGS +300, so gross-profit impact is −100. The separate direct EBITDA component adds +50, leaving total EBITDA impact −50 and adjusted EBITDA 100. Do not enter the derived −100 gross-profit impact as another EBITDA component. Native source contributions reconcile: −400 + 300 + 50 = −50.

Normalization and flow-through differ after the adjusted year

In 2027 both modes calculate adjusted cash EUR 75 versus reported EUR 112.50 under the supplied tax and zero-working-capital assumptions. This is the hypothetical cash result of that alternative model basis, not new money created by presenting adjusted EBITDA.

In flow-through mode the EUR 37.50 cash difference carries into 2028: adjusted cash is 187.50 versus reported 225. In normalization mode 2028 resets to the reported carry basis and cash is 225. Both have 2028 EBITDA 150 because the adjustment components end in 2027.

Choose the downstream valuation basis independently

At the same 8× EV/EBITDA override, reported EBITDA 150 implies EV 1,200. Selecting the adjustment group in the adjusted Trading Comps basis uses EBITDA 100 and implies EV 800. Review the cash/debt bridge separately before comparing Equity Values. A change in valuation basis is not a second operating adjustment.

The operator’s source and selected groups determine its basis; merely creating an adjustment group does not silently switch every valuation engine. Keep reported, adjusted and group selection visible when exporting or discussing results.

Download the synthetic example, explicitly import it under Model, select Advanced and open Model → Adjustments; Value → Trading Comparables. Import creates a separate model with inspectable inputs and sources.

Related decisions and model reference

For adjacent questions: Financial Model Analysis — Drivers, Margins and Cash; Financial Modeling Methods — Inputs, Growth and Drivers; EBITDA Calculator: EBITDA & EBITDA Margin; Trading Comparables & Comparable Company Analysis.

For the exact controls and source behavior, use Adjustments and Adjustment effects and source lineage.