Meaning
Dispute resolution mechanisms in corporate acquisitions assign working capital or net debt disagreements to an independent financial expert. Under an accounting arbitration clause, the selected practitioner reviews disputed line items on a post-closing statement to issue a final financial calculation. The process applies strictly to GAAP or contractually specified accounting principles, stopping where legal interpretation or allegations of fraud arise.
Procedure Trigger
Delivery of a notice of disagreement opens a timed review window. Seeking accounting arbitration requires prior exhaustion of good-faith negotiations over specific statement line items.
Expert Standard
Independent accountants act as expert evaluators who apply their own professional judgment without functioning as judicial referees bound by evidentiary formalisms. When evaluating ledger entries under accounting arbitration, the practitioner reviews historical general ledgers and working papers submitted by both sides. Findings rest on established accounting principles defined in the purchase agreement instead of external legal precedents.
Binding Determination
Final written decisions issued at the conclusion of the review fix the final purchase price adjustment and obligate prompt cash transfer between buyer and seller. Findings generated through accounting arbitration carry limited grounds for judicial appeal, holding firm unless a party proves mathematical error or direct conflict of interest. Courts enforce these awards as contractual determinations, preventing re-litigation of financial calculations that the contract assigned to specialized audit review.
