Contingent consideration
Contingent consideration is consideration in a business combination that depends on future events or conditions, such as performance targets. The acquirer applies the relevant IFRS requirements to recognition, classification, measurement and subsequent accounting. Auditors evaluate the agreement, assumptions and valuation, including uncertainty and disclosure.
Worked example
A buyer agrees to pay the seller an additional amount if two-year sales exceed a target; the auditor examines the agreement and valuation assumptions.
Common mistake
Do not assume all contingent consideration is an immediately payable fixed amount or that subsequent changes are treated the same for every classification.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |