Supported Valuation in a Complex Sale-Leaseback Transaction for a Global Banking Leader
Santander's Success with CPCON
The Challenge
Santander faced the challenge of valuing a complex sales lease-back agreement in compliance with IFRS 16, an international accounting standard governing leases.
To address this, they partnered with CPCON, leveraging their expertise to ensure accurate financial reporting. The process unfolded in four key steps that transformed a complex financial challenge into a strategic advantage.
The Solution Process
CPCON implemented a comprehensive four-step approach to address Santander's complex valuation requirements
Fair Value Determination
CPCON began by assessing the fair value of the asset involved in the transaction and the sale consideration. This involved a detailed evaluation using valuation techniques such as the market, income, and cost approaches.
Key Techniques:
Market, Income & Cost Approaches
Off-Market Adjustments
Next, CPCON compared the asset's fair value to the sale price. Any discrepancies—termed off-market terms—were adjusted to ensure the transaction was recorded accurately in Santander's financial statements.
Compliance Focus:
Alignment with IFRS 16 requirements
Right-of-Use Asset Measurement
CPCON then calculated the ROU asset, representing the portion of rights Santander retained under the lease. This step was complicated by variable lease payments, requiring careful estimation of future cash flows.
Complex Calculation:
Proportional asset value determination
Gain/Loss Recognition
Finally, CPCON computed and recognized any gains or losses based on the rights transferred in the sale. This ensured that only the disposed portion impacted the financials, maintaining compliance with IFRS 16.
Financial Accuracy:
Precise impact assessment on financial statements
Achieved Results
Through our comprehensive approach, we delivered significant value and measurable outcomes for Santander
100% IFRS 16 Compliance
Full alignment with international accounting standards, ensuring regulatory compliance and reporting accuracy
Optimized Valuation
Precise asset valuation leading to improved financial position and strategic decision-making capabilities
Accurate Financial Reporting
Streamlined process reduced valuation and reporting time, enabling faster financial close cycles
Client Success Story
Santander's engagement with CPCON for the valuation of their sales lease-back agreement stands as a testament to the power of specialized expertise. By mastering the intricacies of fair value assessment, off-market adjustments, ROU asset measurement—particularly with variable payments—and gain/loss recognition, CPCON enabled Santander to achieve compliance with IFRS 16 while delivering accurate and reliable financial reporting.
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