When contingent consideration in an acquisition is based on the acquirer issuing its shares to the seller, how should this contingency be reflected on the acquisition date?
belongs to book: ADVANCED ACCOUNTING|Debra C.jeter, Paul K.Chaney|7th edition| Chapter number:1| Question number:67
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Accounting
At the acquisition date the FV of the contingent consideration must be recorded on the parents books regardless of whether stock or cash is used to settle the earnout. Whether contingent consideration (based on stock issuance) is classified as a liability or as equity depends on the characteristics of the earnout.
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