Variable and contingent consideration

In August 2018, following the input received from constituents in response to the EFRAG Research Agenda Consultation, the EFRAG Board approved to add a project on variable and contingent consideration to EFRAG’s research agenda.

The objective of the project is to consider possible alternative accounting  requirements on challenges related to the accounting for variable consideration that can inform the IASB on any future standard-setting activities on or related to this topic.

​​​ EFRAG published the Discussion Paper​ Accounting for Variable Consideration - From a purchaser's perspective on 27 September 2022 and asked for comments by 30 November 2023.  

The Discussion Paper focussed on two issues faced by purchaser entities where there is divergence in practice. These are:

• when to recognise a liability for variable consideration; and

• whether/when subsequent changes in the estimate of variable consideration should be reflected in the cost of the acquired asset.

The Discussion Paper also presented alternatives for accounting requirements for the two issues and outlines the qualitative characteristics of useful information for each of these alternatives. In addition, the Discussion Paper assessed the general IFRS requirements for variable consideration.

The IASB may have to include a project on variable consideration in its work plan in the future and/or address issues related to variable consideration within other projects. Accordingly, this Discussion Paper can contribute to any future related work by the IASB.

An overview of the Discussion Paper was provided in a podcast.

Together with BusinessEurope EFRAG hosted an online outreach event on the Discussion Paper on 16 February 2023. A summary of the webinar was published on 26 April 2023.

To stimulate the debate, EFRAG also conducted an interview with Michael Stewart,  Senior Expert of Financial Reporting at Huawei, in which he provided his views on issues considered in the Discussion Paper.

In April 2024, EFRAG publised a feedback statement summarising the feedback received in response to the Discussion Paper.