How is contingent consideration (an earn-out) accounted for after close under IFRS 3, and why can it create earnings volatility?

Under IFRS 3 contingent consideration is measured at fair value at the acquisition date and included in the cost of the combination (affecting goodwill). The subsequent treatment depends on classification: if it's classified as a liability (a cash/asset obligation), it's remeasured to fair value at each reporting date with changes generally going through profit or loss — so as the probability of hitting the earn-out targets changes, the P&L swings, sometimes materially and counter-intuitively (a successful acquiree raises the earn-out liability, creating a charge). If it's classified as equity, it isn't remeasured. Measurement-period adjustments (within 12 months, for facts existing at acquisition) instead adjust goodwill. The volatility matters because earn-outs common in growth/founder deals can produce large non-operating P&L movements that analysts must strip out — and management must explain — so structuring and disclosure are scrutinized.