Financial Reporting Flash Newsletter

Contingent consideration, often structured as earn-outs, helps buyers and sellers in M&A transactions navigate differing views on price. Under accounting rules, these arrangements must be measured at fair value on the acquisition date, with potential remeasurements in future periods. Analytical approaches vary depending on the payout structure, underlying metrics, and risk characteristics. Careful attention to structure, modeling approach, and documentation of key assumptions is essential for financial reporting.