M&A Exit - Escrow Release (Full or Partial)
Recording the release of M&A escrow proceeds upon expiration of the rep & warranty period, with recognition of the difference between estimated and actual amounts received.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash & Cash Equivalents | Asset (+) | 1,200,000.00 | - |
| Realized Loss - Escrow True-Down (Buyer Claim Settled) | Expense (+) | 300,000.00 | - |
| Escrow Receivable - Exit Holdback (Portfolio Co. T) | Asset (-) | - | 1,500,000.00 |
💡 Accountant's Note
Upon escrow release, the fund receives cash (net of any buyer claims settled from the escrow). If the actual release is less than the previously estimated receivable, the shortfall is recognized as a realized loss. If more is received than estimated (buyer withdrew claims), the excess is an additional realized gain.
Practitioner & Systems Framework
💻 ERP Architecture
Close out the escrow receivable upon release. True-up the realized gain/loss. Update the DPI calculation with the actual cash received. Distribute the released escrow cash to LPs through the waterfall if the fund is past the investment period.
⚠️ Audit Flags
Auditors verify the escrow release calculation, confirmation from the escrow agent, and settlement documentation for any buyer claims offset against the escrow.
📄 Required Documentation
Escrow agent release notice, escrow settlement calculation, buyer claim settlement documentation, wire transfer confirmation of release proceeds.
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