Income Statement Adjustment (Add-Back)Tracing

Ensuring proper support for your cash flow calculation is essential for an accurate business valuation. Our Income Statement Adjustment Tracing Report identifies qualified add-backs and provides supporting documentation that traces those expenses back to the financial statements used in calculating an accurate cash flow analysis. The report calculates both Seller’s Discretionary Earnings (SDE) and Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)—critical metrics in business valuation.

Who Benefits from an Income Statement Adjustment?

Lenders: Strengthens credit memorandums, and underwriting packages, and saves valuable time underwriting an SBA Loan.

M&A Advisors & Business Appraisers: Ensures supportable cash flow, which is critical for an accurate valuation.

Business Owners: Assists in exit planning and valuation preparation.

Find out if you could benefit from an Income Statement Adjustment Tracing Report now.

What’s Included In An Income Statement Adjustment?

Provides an unbiased third-party opinion, adding credibility to financial analysis and reports. Identification and documentation of add-backs.

Verification against General Ledger (GL) which supports financial statements.

Reconciliation with company bank statements to validate adjustments.

Why is Income Statement Adjustment Tracing Important?

Owner benefits expensed on a business P&L—commonly referred to as add-backs—are key to calculating adjusted cash flow, one of the most time-consuming aspects of determining value. Income Statement Adjustment Tracing isolates and verifies these expenses. The process quantifies cash flow in the form of SDE or EBITDA, providing a defensible basis for business valuation, underwriting, or M&A-related activities.

Key Benefits of an Income Statement Adjustment

Unbiased Third-Party Opinion
Provides independent verification, adding credibility to financial analysis.
Competitive Advantage for Banks
Streamlines underwriting by validating cash flow efficiently.
Accurate Cash Flow Calculation
Determines total adjusted cash flow for SDE and EBITDA, which can be used in valuation reports and financial planning.
Enhanced Financial Documentation
Strengthens credit memorandums, lender packages, and M&A advisory reports.

Contact us here to get your Income Statement Adjustment Tracing Report started.

Process Overview

Initial Assessment

General Ledger & Accounting File Review
Personal Expense & Payroll Identification
General Ledger Reconciliation

Final Reconciliation

Bank Statement Reconciliation
Add-Back Verification
Summary of Findings

Final Deliverable

A detailed report that quantifies total adjusted cash flow, ensuring a solid foundation for valuation, underwriting, or M&A transactions.

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GCF’s Business Valuation Accreditations

Your GCF Business Valuation appraisal team has one or more of the following business valuation accreditations:

Accredited Senior Appraiser (ASA) – is recognized as having achieved the highest level of education, training, and report writing for business valuations. The ASA designation is the gold standard for a business valuation professional. (source: American Society of Appraisers)

Certified Business Appraiser (CBA) – a very prestigious credential in the eyes of all who are familiar with it as it earned the reputation of being a difficult credential to obtain. (source: National Association of Certified Valuators and Analysts®)

Certified Valuation Analyst (CVA)
Accredited in Business Valuation by the American Institute of CPAs (ABV by AICPA) – a credential granted exclusively by the AICPA to qualified valuation professionals who demonstrate expertise in valuation through knowledge, skill, experience, and adherence to professional standards. (source: American Institute of CPAs)

Accredited in Business Valuation (ABV) – credential is granted exclusively by the AICPA to CPAs and qualified valuation professionals who demonstrate considerable expertise in valuation through their knowledge, skill, experience, and adherence to professional standards. (source: American Institute of CPAs)
Certified Public Accountant (CPA)

Over 25 years of experience and expertise in business valuations and appraisals. An accredited appraiser receives extensive training, remains in good standing, and follows specific industry practices to determine the value of a business.

GCF’s Machinery and Equipment Appraisal Accreditations

Expert Equipment Certified Appraiser (EECA) – Our appraisers are recognized with a deep understanding of valuation principles and extensive experience by the Institute of Equipment Valuation.

Certified Machinery and Equipment Appraiser (CMEA) – a CMEA professional has the expertise and certification to conduct a third party machinery and equipment appraisal.