Contingent Consideration
Accounting glossary · Understand, connect, apply
Contingent consideration is a payment or other transfer whose amount or occurrence depends on a future event or condition under a business combination agreement.
Example
The seller will receive an extra payment if the acquired company meets a sales target. The buyer includes the acquisition-date fair value of the qualifying payment arrangement in consideration.
Remember the difference
Some conditional payments are compensation for post-acquisition service. Review the terms before classifying them as part of the purchase.
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Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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