或有对价会计处理：组合公司CFO指南

The following is a guest article by Brian Zophin, Partner, and Brian Fitzgerald, Senior Manager, in Crowe's Audit & Assurance practice.

Heading into 2025, some industry forecasts anticipated a rebound in deal activity as interest rates were expected to decline, inflation was slowing, and regulatory hurdles were easing.

In a proposed acquisition, the buyer (a private equity group) may arrange with the seller to pay one or more contingent amounts to the seller after the acquisition closes, when the acquired company achieves specified (financial or nonfinancial) benchmarks. Such contingent payments (i.e., seller earnouts) have become common in purchase price negotiations and may help the parties agree on the valuation of the seller's company.

Why it matters

While it is generally not advisable to let accounting influence business decisions, understanding how contingent consideration is accounted for may be a factor to consider before finalizing an acquisition. The following outlines the impact of different contractual terms on whether an arrangement is recognized as contingent consideration (as part of the purchase price) or as post-transaction compensation expense.

"Contingent payments" can refer to many different types of arrangements, some of which are not obvious. For example, if the seller receives rollover equity with vesting conditions, that equity should be included in the scope of contingent payments and requires further analysis. Types of arrangements to consider include, but are not limited to:

Earnouts
Rollover equity, seller notes, or other forms of consideration with vesting or employment conditions
Employment arrangements with the seller, including bonus arrangements
Pre-acquisition relationships, such as existing share-based payment plans, including those that continue during the post-acquisition period or include post-acquisition service requirements

After the transaction closes, the buyer must navigate the complexities of Accounting Standards Codification (ASC) 805, "Business Combinations," including the analysis and proper accounting for contingent consideration arrangements.

When determining whether an arrangement should be accounted for as contingent consideration or as post-combination compensation expense, accounting and finance teams should also understand whether the buyer or seller is the initiator, and the purpose of entering into the contingent payment arrangement. If the arrangement is primarily intended to benefit the acquirer, rather than the seller or the seller's shareholders, such amounts may be considered compensation for post-combination services and should be recorded as compensation expense.

Eight indicators of contingent consideration vs. post-transaction compensation

Under ASC 805-10-55-24, "Whether contingent payments to employees or selling shareholders are contingent consideration in a business combination or are separate transactions depends on the nature of the arrangement."

If it is not clear whether an arrangement for payments to employees or selling shareholders is part of the consideration exchanged for the acquiree or is a transaction separate from the business combination, the acquirer should consider the following indicators, excerpted from ASC 805-10-55-25:

1. Continuing employment.The terms of continuing employment for selling shareholders who become key employees may indicate the substance of the contingent consideration arrangement. Relevant employment terms may be included in an employment agreement, acquisition agreement, or other documents.

If the contingent payments are automatically forfeited upon termination of the seller's employment, the arrangement should be accounted for as compensation for services provided after the business combination.

These factors apply to employment arrangements in which the contingent consideration is not forfeited upon termination of employment, as well as to consulting, transition service, and similar non-employment arrangements.

2. Duration of continuing employment.If the required employment period is equal to or longer than the contingent payment period, that may indicate that the contingent payments are, in substance, compensation.

Particular attention should be paid to post-acquisition employment contracts of selling shareholders. For example, assume an earnout period of two years and the seller also signs an employment contract. If the contract term is two years or longer, that indicates the payments are compensation expense. However, if the seller's employment term is shorter (e.g., one year), that may indicate the earnout is considered purchase consideration.

3. Level of compensation.If employee compensation, excluding the contingent payments, is at a reasonable level compared with that of other key employees of the combined entity, that may indicate the contingent payments are additional consideration rather than compensation.

The acquirer should consider whether the selling shareholder has responsibilities comparable to those of other key employees and use judgment in assessing the reasonableness of compensation.

4. Incremental payments to employees.If selling shareholders who do not become employees receive lower per-share contingent payments than selling shareholders who become employees of the combined entity, that may indicate that the incremental contingent payments to selling shareholders who become employees are compensation.

The company should determine whether the contingent payment arrangement is offered only to selling shareholders who remain as employees of the combined entity. Such an arrangement appears to indicate post-combination compensation expense.

5. Number of shares held.The relative number of shares held by selling shareholders who remain as key employees may indicate the substance of the contingent consideration arrangement. For example, if selling shareholders who hold substantially all of the acquiree's shares continue as key employees, that may indicate the arrangement is, in substance, a profit-sharing arrangement intended to provide compensation for post-combination services.

The relative ownership held by selling shareholders is one of the indicators considered in determining whether contingent payments represent compensation expense or purchase consideration. When contingent payments are more closely tied to the valuation method or formula used to negotiate the transaction, that may indicate the additional payments are consideration.

6. Linkage to valuation.If the initial consideration transferred at the acquisition date is based on the low end of the range of the acquiree's valuation, and the contingent formula is related to that valuation method, that may indicate the contingent payments are additional consideration.

The more closely the contingent payments are tied to the valuation method or formula used to negotiate the transaction, the more likely the additional payments are consideration. If the selling shareholder forfeits the contingent consideration upon termination of employment, the linkage to valuation is no longer relevant, and the arrangement should be treated as post-combination compensation expense.

7. Formula for determining consideration.The formula used to determine the contingent payments may help in assessing the substance of the arrangement. For example, if the contingent payments are based on a multiple of earnings, that may indicate the obligation is contingent consideration in a business combination and that the formula is intended to establish or verify the fair value of the acquiree.

Payment arrangements based on a multiple of earnings (such as EBITDA) are more likely to be contingent consideration, while payments based on a percentage of earnings are more likely to be profit-sharing plans and should be accounted for as post-combination compensation expense.

8. Other agreements and issues.The terms of other arrangements with selling shareholders (such as noncompete agreements, executory contracts, consulting contracts, and property lease agreements), as well as the income tax treatment of the contingent payments, may indicate that the contingent payments are attributable to something other than consideration for the acquiree.

For example, in an acquisition, the acquirer may enter into a property lease arrangement with a significant selling shareholder. If the lease payments specified in the lease contract are significantly below market, then part or all of the contingent payments required by a separate contingent payment arrangement to be paid to the lessor (the selling shareholder) may, in substance, be lease payments for the use of the property that the acquirer should recognize separately in its post-combination financial statements.

Other arrangements or issues may include contingent payment arrangements in which selling shareholders provide consulting services at below-market rates. Such arrangements should be evaluated to determine whether they are at fair value. If not, further evaluation is needed to determine the appropriate accounting.

Group scenarios

When contingent payments are directed at a group of individuals, it is important to consider each individual separately. For example, an agreement may provide for a total earnout payment of $5 million to a group of individuals. Assume the group includes shareholders and the CEO, and the earnout is paid only to individuals who continue to provide services for one year after the transaction. In this scenario, the $5 million payment is likely to be treated as compensation expense. Such scenarios are often referred to as "last man standing" arrangements.

These scenarios are not exhaustive. Any arrangement with employees or selling shareholders, whether or not directly related to the acquirer, needs to be evaluated within the scope of ASC 805-10-55-25.

After the transaction closes and acquisition accounting begins, accounting and finance teams should understand the purpose of the payment arrangement and evaluate the indicators when analyzing whether the arrangement is contingent consideration or post-combination services (compensation).

If payments to the seller are conditioned on the seller's continued employment after the transaction (e.g., the seller must remain employed through the payment date), this is generally considered strong evidence that the arrangement represents post-transaction compensation rather than contingent consideration. If the payments are not forfeited upon termination of service, the factors listed in ASC 805-10-55-25(b-h) should be considered to evaluate the appropriate accounting.