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Accounting and valuation considerations for ABS set-up, October 2018

Stuart Hatcher IBA, and Ian Nelson from KPMG discuss the accounting and valuation considerations for ABS set-up.

Differentiating between a business and an asset acquisition is key for accounting and valuation. Solely valuating the aircraft will not be enough for financial reporting and factors including acquired debtors, creditors and goodwill on acquisition will all need to be taken into account.

Valuation Considerations

  • Avoid surprises down the road by building close ties with your appraiser, don’t be too reliant on the investment bank on the sell side and the secondary buyer usually knows less. Aircraft are highly technical assets, Appraiser opinions are wide – know who you are dealing with.
  • Avoid DD shortcuts, get adjusted values from all 3 appraisers involved, not just base or CMV. Perform independent buy side DD on the credits involved.
  • Fully stress-test your cash flow analysis, cash-flow analyses can be binary, airlines are not − get a second opinion, factor in potential lease extensions ensuring the new lease rate and extension periods are realistic.

A copy of the full slide deck is available to download.

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