Deferred consideration
At the acquisition date, determine the relevant fair value or present value under the applicable standard and transaction facts. Fixed deferred consideration is not necessarily contingent on future performance and subsequent accounting is not automatically repeated fair-value remeasurement. A financing element can give rise to finance cost over time. Contingent consideration has separate IFRS 3 classification and subsequent-measurement rules. Distinguish the acquirer’s payable from the seller’s receivable.
Worked example
An acquirer must pay $110,000 in one year as fixed consideration for a business. If the appropriate one-year discount rate is 10%, the acquisition-date present value is $100,000; absent other movements, the liability grows by $10,000 over the year.
Common mistake
Treating all deferred consideration as contingent, or recognising a liability in the seller’s accounts for an amount owed to the seller.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |