Contingent consideration in a business combination: Accounting rules

In business combinations, an initial gap often exists between amounts buyers and sellers offer to pay and accept. Closing that gap frequently is accomplished through contingent consideration arrangements. Commonly referred to as an “earnout”, contingent consideration is a piece of the acquisition price that is paid only if some future event or outcome occurs. The challenge with earnouts or contingent consideration is that they can be structured in seemingly infinite ways and, therefore, a cookie-cutter version that can be followed