What does EBITDAaL stand for?

Earnings before interest, tax, depreciation and amortisation, after leases. It is reported EBITDA under IFRS 16 less the depreciation of right-of-use assets and the interest on lease liabilities. Companies spell it in several ways, including EBITDA AL and EBITDA after leases, and some publish an adjusted or underlying version that also excludes one-off items. Because it is not defined by any accounting standard, the company's own reconciliation is the definition that counts.

Is EBITDAaL the same as EBITDA before IFRS 16?

Close, but not the same. Before IFRS 16, the rent was charged in operating costs, usually evenly over the lease. EBITDAaL deducts depreciation and interest instead, and interest is front-loaded, so a young lease costs more under EBITDAaL than its rent and an old one less. The lease term and payments that count can also differ from the old rent line. Across a mature portfolio the two figures tend to be close; after a burst of new leases they can diverge.

Why do telecom companies report EBITDAaL?

Because their leases are large and long: tower sites, network space, shops. When IFRS 16 moved those costs below EBITDA, their EBITDA rose sharply and lost comparability with earlier years and with peers that own rather than lease. EBITDAaL restores a measure in which the cost of using leased assets is part of operating performance. Many also use it, with debt excluding lease liabilities, in the leverage targets they publish.

Should leverage use EBITDA or EBITDAaL?

Either, if the debt matches. Leverage built on IFRS 16 EBITDA should include lease liabilities in debt; leverage built on EBITDAaL should exclude them. The two answers will differ somewhat, and a lender may prefer one for consistency with its covenants or its peer comparisons. The mistakes are the mixed pairings: lease liabilities in debt with EBITDAaL, which charges for leases twice, or IFRS 16 EBITDA with debt that excludes them, which ignores leases entirely.

// WORKED EXAMPLETHE ARITHMETIC A DECISION RESTS ON

EBITDAaL: a Worked Example

Take the leases out of earnings or put them into debt. Not both.

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-07 · 6 MIN READ

// THE SHORT ANSWER

EBITDAaL is the earnings figure a heavy lessee publishes when it wants its lease costs read as operating costs again. Under IFRS 16, rent leaves EBITDA and reappears below it as depreciation and interest; EBITDAaL deducts those two lease charges and brings the cost back above the line. A lender meeting it has one task: to set it against debt measured the same way, which means borrowings without the lease liabilities. Because no accounting standard defines the measure, each company's version is read from its own reconciliation before any ratio is built on it.

BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

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// 01 — WHY HEAVY LESSEES PUBLISH IT

Before 2019, a mobile operator's tower-site rent and a retailer's store rent sat in operating costs, above EBITDA. IFRS 16, adopted as NZ IFRS 16 and AASB 16, moved most of that cost below: it now appears as depreciation of a right-of-use asset and interest on a lease liability, neither of which EBITDA counts. For a business with large leases, reported EBITDA jumped with nothing changed, and a figure that managers and investors had tracked for years stopped being comparable with its own history. Companies with large lease books, telecom operators most visibly, answered by publishing EBITDA after leases.

The standard does not require it, and it has no fixed definition. Some companies start from an underlying EBITDA that already excludes one-off items; some leave particular kinds of lease out of the deduction. Regulators treat it as a non-GAAP measure: New Zealand's FMA and Australia's ASIC both expect an issuer that publishes one to define it, reconcile it to the statutory figures and present it consistently from period to period.

// 02 — HOW IT IS CALCULATED

EBITDAaL = EBITDA on the IFRS 16 basis

− depreciation of right-of-use assets

− interest on lease liabilities

EBITDAaL sits beside borrowings, lease liabilities left out

IFRS 16 EBITDA sits beside borrowings + lease liabilities

Two costs stayed in EBITDA throughout and are not deducted again. Payments on short-term and low-value leases that a company chooses not to capitalise, and variable payments outside the liability, such as rent linked to sales, are expensed as they fall due. Only the capitalised leases are taken back out. And the deduction is the accounting charge, not the cash. Depreciation plus interest is heavier than the rent early in a lease, because interest is highest while the liability is largest, and lighter towards the end. Across a portfolio of leases of different ages the difference tends to even out; in a business that has just signed a wave of new leases, EBITDAaL can sit below what EBITDA after rent used to be.

// 03 — THE EXAMPLE

A telecommunications operator, constructed for this page like every figure in it, leases tower sites, shops and network space. It reports under IFRS 16. For the year, in US$m:

EBITDA (IFRS 16 basis) 240

Depreciation of right-of-use assets − 52

Interest on lease liabilities − 14

EBITDAaL 174

Borrowings 600 · lease liabilities 260

Lease cash paid: 48 principal + 14 interest = 62

Leases in debt and in earnings: (600 + 260) ÷ 240 = 3.58×

Leases out of both: 600 ÷ 174 = 3.45×

In debt, out of earnings: (600 + 260) ÷ 174 = 4.94× ← counted twice

In earnings, out of debt: 600 ÷ 240 = 2.50× ← counted nowhere

The first two lines are both coherent readings, and they differ only because the leases carry 260 of liability against 66 of cost, a heavier ratio than the 600 of borrowings against 174 of EBITDAaL. The third and fourth are the errors. The third charges for the leases twice, once as debt and once as cost; the fourth leaves them out of the ratio altogether. Nearly two and a half turns separate them, and none of it comes from the business. One more line belongs in the file: EBITDA less the lease cash paid is 240 − 62 = 178, four more than EBITDAaL, because this year's accounting charge of 66 exceeds the 62 that left the bank. EBITDAaL is not a cash figure, and these levels are the example's, not a norm.

// 04 — HOW IT DIFFERS FROM EBITDAR

EBITDAR and EBITDAaL both deal with leases, from opposite ends. EBITDAR adds rent back to earnings so that the leases can be capitalised and added to debt; it was the route lenders took when leases lived off the balance sheet, and the one the lease-adjusted leverage page works. EBITDAaL starts from accounts in which the leases are already capitalised and takes their cost back out of earnings, so that the leases can stay out of debt. A lender who wants to read leases as debt has them, under IFRS 16, on the balance sheet and outside EBITDA already. A lender who wants to read them as operating costs uses EBITDAaL. What a file cannot do is take its earnings from one route and its debt from the other, which is what the third and fourth lines of the example do.

DEFINED IN ONE PARAGRAPH → · EBITDAR → · RIGHT-OF-USE ASSET AND LEASE LIABILITY →

// 05 — WHERE IT DECIDES A FILE

It matters most in covenant definitions and in comparing borrowers. A facility agreement that tests leverage on an EBITDA after leases should leave lease liabilities out of debt, and one that counts the liabilities should use IFRS 16 EBITDA; the definitions section is where a mismatch hides, and a frozen GAAP clause can add a third basis beside both. A lender comparing a borrower under IFRS 16 with one whose special-purpose accounts still charge rent in operating costs can put the two on a similar footing by reading the first on an EBITDAaL basis, provided it does the same to the debt. And a lender handed a company's own EBITDAaL reads the reconciliation first: which leases were deducted, and from which EBITDA.

DEBT TO EBITDA → · FROZEN GAAP →

// SOURCES

The documents the statements on this page rest on. Each was opened and checked when cited.

Financial Markets Authority (New Zealand), Guidance note: Disclosing non-GAAP financial information, July 2017 — Presenting non-GAAP financial information — Sets the FMA's expectation that non-GAAP measures be defined, reconciled to the most comparable GAAP information and presented consistently, since otherwise they can mislead — section 01.
Australian Securities and Investments Commission, Regulatory Guide 230: Disclosing non-IFRS financial information, December 2011 — ASIC's guidance to directors and preparers on presenting financial information not prepared under accounting standards, in reports and market announcements — section 01.
Australian Accounting Standards Board, AASB 16 Leases (compiled, applicable from 1 January 2024), the Australian text of IFRS 16 — paragraphs 5, 6, 38 and 49 — Allows short-term and low-value leases to be expensed, keeps variable payments outside the liability in profit or loss, and presents lease interest within finance costs, separate from right-of-use depreciation — section 02.

// QUESTIONS PEOPLE ASK

What does EBITDAaL stand for?: Earnings before interest, tax, depreciation and amortisation, after leases. It is reported EBITDA under IFRS 16 less the depreciation of right-of-use assets and the interest on lease liabilities. Companies spell it in several ways, including EBITDA AL and EBITDA after leases, and some publish an adjusted or underlying version that also excludes one-off items. Because it is not defined by any accounting standard, the company's own reconciliation is the definition that counts.
Is EBITDAaL the same as EBITDA before IFRS 16?: Close, but not the same. Before IFRS 16, the rent was charged in operating costs, usually evenly over the lease. EBITDAaL deducts depreciation and interest instead, and interest is front-loaded, so a young lease costs more under EBITDAaL than its rent and an old one less. The lease term and payments that count can also differ from the old rent line. Across a mature portfolio the two figures tend to be close; after a burst of new leases they can diverge.
Why do telecom companies report EBITDAaL?: Because their leases are large and long: tower sites, network space, shops. When IFRS 16 moved those costs below EBITDA, their EBITDA rose sharply and lost comparability with earlier years and with peers that own rather than lease. EBITDAaL restores a measure in which the cost of using leased assets is part of operating performance. Many also use it, with debt excluding lease liabilities, in the leverage targets they publish.
Should leverage use EBITDA or EBITDAaL?: Either, if the debt matches. Leverage built on IFRS 16 EBITDA should include lease liabilities in debt; leverage built on EBITDAaL should exclude them. The two answers will differ somewhat, and a lender may prefer one for consistency with its covenants or its peer comparisons. The mistakes are the mixed pairings: lease liabilities in debt with EBITDAaL, which charges for leases twice, or IFRS 16 EBITDA with debt that excludes them, which ignores leases entirely.

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THE NUMBER · THE LOAN · CAPACITY

A property investor collects US$2.4m of rent a year and spends US$0.4m running the building. Interest and principal on its loan come to US$1.6m a year.

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THE READING ROOMIN ONE PARAGRAPHEBITDAaL (EBITDA after leases) What is EBITDAaL, and how does it differ from EBITDA and EBITDAR?