In finance meetings, operating profit and EBITDA are often used interchangeably. Yet they answer different questions. PSAK 118 makes the difference more important: operating profit becomes a mandatory subtotal with a strict definition, while EBITDA remains a management measure that must be explained when used publicly.
1. Two Numbers, Two Questions
- Operating profit answers: “After all costs of running the business — including depreciation — how much profit came from the core activity?”
- EBITDA answers: “Before interest, taxes, depreciation, and amortization, how much operating cash profit does this business generate?”
Neither number is “wrong” or “right.” What is wrong is treating them as the same.
2. Operating Profit Under PSAK 118
PSAK 118 requires operating profit to be presented. It comprises all income and expenses classified in the operating category. That means depreciation of operating assets, amortization, impairment, and other operating expenses are already included.
Simple example: a company has gross profit of Rp400 million and operating expenses of Rp150 million — of which Rp50 million is depreciation. Operating profit is Rp250 million.
3. EBITDA: A Management Measure, Not a PSAK Subtotal
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. From the example above, EBITDA = Rp250 million + Rp50 million = Rp300 million.
EBITDA is useful for seeing operating performance before financing structure, taxes, and non-cash charges. But it is not a PSAK-mandated subtotal.
| Aspect | Operating Profit | EBITDA |
|---|---|---|
| Depreciation & amortization | Included | Excluded |
| Interest | Not included (financing category) | Excluded |
| Tax | Not included (tax category) | Excluded |
| Impairment | Included if operating | Often excluded |
| PSAK 118 status | Mandatory subtotal | Management measure (if used publicly) |
4. A Worked Example
| Line item | Rp million |
|---|---|
| Revenue | 1,000 |
| Cost of revenue | (600) |
| Gross profit | 400 |
| Operating expenses (including depreciation 50) | (150) |
| Operating profit | 250 |
| Depreciation | 50 |
| EBITDA | 300 |
| Interest expense | (30) |
| Tax expense | (55) |
| Net profit | 165 |
Note: EBITDA is Rp50 million higher than operating profit, exactly the depreciation amount. Neither is wrong — they simply measure different things.
5. When Does EBITDA Become an MPM?
This is widely misunderstood. PSAK 118 excludes several subtotals from the definition of Management-defined Performance Measures (MPMs), including:
- gross profit;
- operating profit before depreciation, amortization, and impairment (i.e., standard EBITDA);
- operating profit plus share of equity-method investments;
- profit before tax; and
- profit from continuing operations.
So, standard EBITDA is not an MPM. But once you add other adjustments — for example Adjusted EBITDA that excludes restructuring costs, unrealized FX, or gains on asset disposal — the measure becomes an MPM and must be disclosed and reconciled.
EBITDA is allowed. What is not allowed: presenting it as if it were an official PSAK subtotal, or using an “adjusted” version without explaining how it is calculated.
6. Preparing It in Odoo
- Operating profit — make sure the Odoo profit and loss report already separates the operating category and calculates its subtotal. Do not rely on the default “Operating Income” line without checking its content.
- EBITDA — not a standard report. Calculate it from operating profit plus depreciation and amortization. Watch for depreciation “hidden” in cost of sales, not just in the depreciation expense account.
- Reconciliation — if you use Adjusted EBITDA, prepare a reconciliation table to operating profit (the nearest PSAK subtotal) in a spreadsheet or custom report.
- Consistency check — ensure the EBITDA figure in internal reports matches the one used in investor presentations or press releases.
7. Common Mistakes
- Calling EBITDA “operating profit” in official reports.
- Adding back trade receivable impairment — that is part of operations.
- Forgetting depreciation embedded in cost of sales.
- Showing Adjusted EBITDA without reconciliation or rationale.
- Comparing EBITDA across companies without checking each definition.
Closing
Operating profit and EBITDA are both useful. The difference: operating profit is the official PSAK 118 figure, while EBITDA is a management tool. As long as the difference is understood — and explained — both can coexist without confusing readers.
Want to make sure your Odoo reports are PSAK 118-ready? Talk to the Sinergi Data Totalindo (SDT) Team.
Note: this article refers to the official PSAK 118 text and illustrations. Figures are illustrative. Classification and disclosure decisions still require accounting judgment and review by practitioners/auditors. Written by Sinergi Data Totalindo, PT.