EBIT AND XBRL

EBIT AND XBRL

1.What is EBIT and why do financial statement users care?  EBIT is a firm’s earnings before interest and taxes.  Financial statement users care about what decisions management makes within the context of the firm’s value chain.  Separating off the debt financing and tax management figures focuses attention on the basic firm earning activity.

2.What does XBRL have to do with EBIT?  XBRL primary function is tagged data of financial statement line items and footnotes.  EBIT is not an XBRL tagged a line item by that name and thus a problem may occur in getting the number you want for interpretation’s purposes.  The most equivalent XBRL tag for EBIT is us-gaap:OperatingIncomeLoss.  An example of $86,530,000 from the 2011 Barnes Group Inc’s 10K report on www.sec.gov  (the ticker symbol is B) is

<us-gaap:OperatingIncomeLoss contextRef=”Duration_1_1_2010_To_12_31_2010″ unitRef=”Unit1″ decimals=”-3″>86530000</us-gaap:OperatingIncomeLoss>

But, what if the previously referenced XBRL tag is not available or you want to cross-check the number whether it was specified appropriately for your ratio analysis?  Then, a calculation may be performed utilizing several XBRL tagged line items.  Take the Income/Loss from Continuing Operations and add back the Income Tax and Interest Expense.  In the case of the Barnes Group the result above does not match because there is an Other Expense line item below the Operating Income/Loss number.  See the tags and calculations below

<us-gaap:IncomeLossFromContinuingOperations contextRef=”Duration_1_1_2010_To_12_31_2010″ unitRef=”Unit1″ decimals=”-3″>53278000</us-gaap:IncomeLossFromContinuingOperations>

<us-gaap:IncomeTaxExpenseBenefit contextRef=”Duration_1_1_2010_To_12_31_2010″ unitRef=”Unit1″ decimals=”-3″>10758000</us-gaap:IncomeTaxExpenseBenefit>

<us-gaap:InterestExpense contextRef=”Duration_1_1_2010_To_12_31_2010″ unitRef=”Unit1″ decimals=”-3″>20014000</us-gaap:InterestExpense>

The sum of the above three figures is $84,050,000 which is not the previously mentioned number.  Users of financial statements are advised to cross-check XBRL information for EBIT and other financial terms which are not line items.

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