In it’s Q4 2020 earnings release AbbVie (NYSE: ABBV) reported that it recorded a $4.7 billion increase in the contingent consideration liability for the drug Skyrizi. This expense wiped out ABBV’s net earnings for the quarter. Therefore, I decided to do some research to try to understand what a contingent consideration liability is.
What is a contingent consideration?
Contingent considerations are financial instruments employed in complex business transactions. Their purpose is to share risk associated with the transaction between buyers and sellers. A contingent consideration is an obligation of the buyer to transfer additional assets (cash, equity, physical assets) to the seller if future events occur or conditions are met.Continue reading “What is a contingent consideration liability?”