EARN-OUT Definition

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EARN-OUT refers to an additional payment in a merger or acquisition that is not part of the original acquisition cost, which is based on the acquired company's future earnings relative to a level determined by the merger agreement.

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VARIANCE ANALYSIS is the analysis of performance by means of variances. Used to promote management action at the earliest possible stages. After a budget (based on standard costs) has been set, its usefulness lies in the review procedures which compare actual results against the budget. Variance analysis is the process of examining in detail each variance between actual and budgeted/expected/standard costs to determine the reasons why budgeted results were not met (material costs too high, sales prices too low, etc.).

SUFFICIENCY, in accounting, is a measure of the quantity of audit evidence. The independent auditor's objective is to obtain sufficient appropriate evidence to provide a reasonable basis for an opinion.

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