Completion Accounts Disputes: Expert Witness UK

What Is a Completion Accounts Dispute?

A completion accounts dispute arises when buyer and seller cannot agree on the financial position of the target at completion. In a completion accounts mechanism, the purchase price is adjusted after completion based on the actual financial position of the business at the completion date, typically working capital, net debt, and/or net assets compared to an agreed target.

What Causes Disputes

Disputes arise when buyer and seller disagree on:

• Which accounting policies should apply (the agreed accounting basis)
• Specific items: provisioning, revenue recognition, deferred revenue, contingent liabilities
• Whether the reference accounts accounting policies were consistently applied
• The correct treatment of specific transaction items (e.g. IFRS 16 leases, accruals methodology)

Expert Determination: The ICAEW Process

Most SPAs contain an expert determination clause for completion accounts disputes, providing for an independent accountant (often appointed by ICAEW) to make a binding determination. The forensic accountant supports one party's position through the determination process, analysing the disputed items and producing written submissions.

IAS 37 Provisions in Completion Accounts Disputes

IAS 37 provisions are among the most commonly disputed items in completion accounts. Parties disagree on whether provisions were adequate, consistently applied with the reference accounts, and prepared in accordance with the agreed accounting basis in the SPA.

Key Accounting Issues in Completion Accounts