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An additional payment to a founder-shareholder of the acquiree is contingent on him/her continuing in employment for two years after acquisition. This payment is:
ATreated as post-combination employee compensation expense over the service period
BCapitalised to goodwill
CRecognised in OCI
DTreated as additional purchase consideration
Answer & Solution
Correct answer: A. Treated as post-combination employee compensation expense over the service period
Where the payment is contingent on continued employment, it is remuneration for post-acquisition services, NOT purchase consideration. It is expensed as employee benefit over the requisite service period (paragraph B55).
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