EBIDA workout. In this workout, we're going to calculate EBITDA with the adjustments that are necessary. We have an abridged set of financial statements that include the income statement and the cash flow statement and then we have some notes here that are going to help us make the adjustments. We have a note on the pensions. We have a note on the investments in Joint Ventures and Associates and we have a note on the other operating income and expenses which has been included in our operating profit. So we wanna know what's going into that "other account." And because this is an IFRS reporting company, they have included the references to the notes in the financials which is always a nice bonus when working with IFRS companies. So if we were looking at the income statement, we would know where to go by looking at this notes column and seeing which note there is detail on that particular line item. So what I wanna do is I wanna start with my operating profit. Generally, we're gonna build EBITDA off of operating profit. There are cases when EBITDA can be built from net income but in general, it's easier to hone in on operating profit because that's gen those are generally the earnings that we wanna consider first and foremost, the operating earnings. So here, I have a choice of starting with profit from recurring operations or operating profit. This other operating income and expenses is a note that we're going to dig into and I think it's important that we actually do dig into that note. So I'm gonna start with operating profit and then we'll address the other operating income and sort out what should and should not be included later on. So my reported operating profit is 11,273.

The first thing I'm gonna do is I'm gonna adjust for the things that are included in operating profit that I know don't belong. So the first thing I'm going to attack is the pension. Under US GAAP, the service cost is the only item that would be included in the operating expenses. Under IFRS, both the service cost and the net interest cost can be included.

leave in the service cost but we're going to add back the net interest cost which here is amounts to 12, pension net interest cost.

And then I'll deal with the remainder of the pension adjustments in a moment. The next thing that we know is included in this operating profit number is the income from Joint Ventures and Associates. Now this 28 represents the accrued profits from an investment in a joint venture or an equity investment and affiliate investment. This is a non-controlled investment so we wanna make sure that we take this out of our earnings. So I'm going to deduct affiliate profits and that's 28. That's gonna bring me to my adjusted operating profit.

Now I can go through and adjust for other items in the bridge to the EBITDA calculation. So the first and obvious is always our D&A and this of course we can get from our cash flow statement. In this case, the depreciation is going to be the 2,700 for the traditional D&A and then the 2408 for the depreciation of the right of use assets. That's going to equal 2,700 plus 2408. Now I need to go back into the notes and start making some of the adjustments that are not so obvious. So, the first thing I'm gonna do is gonna go back into the pension note. And I want to adjust for the 46, this change in plans.

And what it says in the note here is that both the change in plans and the net interest cost have been included in the operating expenses. The actuarial gains and losses have been excluded and put straight through to the equity account. So if we look in the note, we can see that that's what they're telling us. So that 46, we want to add back. It's an expense that has been included in the operating profit that we wanna add back. So I'm gonna take that 46 and I'm gonna add it back. And since the service cost should be included and the net interest cost has already been adjusted for and we know that the actuarial gains have been put straight through to the equity account, we can now put the pension adjustments behind us. So the next thing we have to dig into is this other operating income and expenses. This note nicely lays out for us everything that has been included in the 231. We've got restructuring costs of 57. Those will obviously be added back. We've got transaction costs related to M&A activity of 45. Those will be added back. And we've got the impairment or amortization of brands, trade names, goodwill and other fixed assets. And because that is an impairment or a write-down which is a non-recurring event, not an ongoing amortization, we're going to add that back as well. And then of course within the other note, we've got other items of 104 and if we look down below at that note, it says that this relates to the donation for the construction or the reconstruction of the Notre Dame in Paris. So, that is obviously a non-reoccurring item. And as it turns out, we could have actually skipped this entire other operating income and expenses and simply gone with the operating profit line from the recurring operations above. And honestly, you know, the fact that they're telling us that it's profit from recurring operations is a big hint that that's the number that we would want in an EBITDA calculation which is traditionally a recurring earnings calculation. However, it is always good to be safe and have a look at all these items and make sure that they're items that we do in fact want to include or X. So since I've already included them, I'm just gonna go ahead and map them out here. We have the restructuring cost of 57. We have M&A costs of 45. We've got the impairment of intangibles of 26. We've got other items of 104 and all of these are going to be added back because they were all expenses. The last thing we need to do is revisit the investment in the affiliate. We've gone ahead and we've deducted the profit from the investment and that was done up top here because this 28 is an accrual, it's non-controlled earnings. They're certainly earnings that you would not lend on because they're not controlled so we wanna make sure that we get those out. Now, the dividends are typically allowed if you're going by the credit rating agency's methodology. And this is up for debate. We don't always necessarily include the dividends if we're looking at this perhaps in a lending situation, but if we're trying to comply with credit rating agencies for a rating, we might include them. And in this situation, what we're gonna do is we're going to include them. So if we look over here, we see that there were dividends for the affiliate of 20 in 2019 and that's right here. So I'm gonna go ahead and I'm going to add the 20 of dividends. And since these are cash, that's effectively the perspective of the rating agencies is that they are cash. It is income coming in. Therefore we will give the debtor the benefit of the doubt in including this cash. And it's the same kind of thing that happens with with interest income. It's occasionally included. It's sometimes not included and it really is just something that that should be questioned. So if I add up all of my adjustments including the adjusted operating profit, I get to an EBITDA or adjusted EBITDA as it is sometimes now called of 16,663.

I'll just pop my formulas out here to the right so you can see how I got the subtotal and the total. And lastly, one quick note about this affiliate profits. Only under IFRS is this amount actually included in the operating profit of a company. Typically under GAAP, we would never see associate income or equity income, affiliate income included in the operating profits. And so this is something as well to watch out for when working with IFRS companies. Typically we can avoid it altogether with GAAP companies simply by taking the operating profit number. However with IFRS companies, that kind of income can be included in the operating profit. A lot of times it depends on the nature of that business and the investment. So we always wanna make sure that we're looking out for that so that we can back it out.