Discretionary Earnings of a business are made up of the net income which has been ‘normalised’ by making necessary adjustments in terms of additions and subtractions so the earnings can be compared. Discretionary earnings are not the same as EBITDA. In addition to adding back interest, amortisation, depreciation and taxes, other adjustments are made. Discretionary expenses are added whilst non-recurring and extraordinary items such as revenues (deducted) and expenses added. Discretionary earnings therefore represent the adjusted income of the business being valued and are sometimes referred to as Adjusted or Normalised Earnings.