On January 1, Year 1, Shaq Co. acquired 100% of the outstanding common stock of O’Neal Co. As part of the total consideration transferred, Shaq promised to the shareholders of O’Neal to issue on May 1, Year 2, additional 1,000 shares of common stock if the total consolidated net income for Year 1 is greater than $1Billion. The consolidated net income in Year 1 was $1.2 Billion.

The controller of Shaq Co. took the ACCY 410 class at the UIUC and remembers that this contingent consideration must be classified as equity (i.e., APIC) in the consolidated financial statements. However, the controller did not always come prepared to the class and does not remember whether this contingent consideration should be remeasured on 12/31/Year 1 or not.

Research and cite a specific paragraph in the Accounting Standard Codification that can help the controller to determine whether this contingent consideration should be remeasured at the year-end, or not. Unless specifically requested, your response should not cite implementation guidance and illustrations.

FASB ASC                               -                   -                   -

Answer rating: 100% (QA)

Contingent consideration is an obligation of a buyer of the business to transfer consideration asset... View the full answer