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Expert Determination for Professional Services Business

Financial and Professional Services

Completion accounts – income recognition dispute

A dispute arose between the Vendors and Purchasers of a professional services business. Under the SPA, initial consideration was payable plus deferred consideration in instalments over 2 years. Total consideration was adjustable up or down, by reference to target net assets in the Completion Accounts. The Completion Accounts were the subject of a protracted dispute, central to which was the method of recognising income and expenditure under 12-month contracts.

Accountants were retained by both sides throughout, each contending for a different approach. Appointed under the President’s Appointments Scheme, we found imperfections and inequity in both calculations. Using underlying data, we established an alternative approach treating the contracts as retainers, recognising income and expenditure evenly throughout.

In our binding expert determination, we arrived at completion net assets that were about one-half the figure contended for by the Seller, but considerably more than the deficit the Purchaser argued.

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