What’s normal? Normalization adjustments are essential in valuation
Abstract: Fine-tuning financial statements helps a business valuation expert compare the subject company’s performance to the financial performance of similar public or private companies. This article explains normalization adjustments for 1) unusual and nonrecurring items, 2) nonoperating assets, 3) related-party transactions, and 4) accounting norms. Regardless of how an adjustment may be classified, however, professional judgment is essential to ensure meaningful comparisons.