Anika Therapeutics, Inc. (Anika), develops and manufactures products that help physicians treat patients with osteoarthritis and other joint issues. In 2020, Anika acquired Parcus Medical (Parcus) and Arthrosurface companies. Parcus is a sport medicine company focused on patient solutions for surgical repair and reconstruction of ligaments and tendons, while Arthrosurface specializes in joint surface and reservation solutions. Anika acquired each of these two companies in exchange for cash and contingent consideration. Referring to Anika’s 2020 annual report, answer the following question regarding these acquisitions.

1. What is the maximum contingent payment amount to the former owners of Parcus Medical and Arthrosurface? What events determine whether the contingent payments will be paid?

2. What value for the contingent payments was included in the total for consideration transferred? How was this value determined?

3. Where were the contingent payments shown in Anika’s 2020 consolidated balance sheet?

4. Identify and discuss some possible motivations to explain why Anika, Parcus Medical, and Arthrosurface agreed to contingent payments as part of the total consideration transferred in the acquisitions.