Which of the Following Statements in Relation to Contingent Consideration

question 34

Multiple Choice

Which of the following statements in relation to contingent consideration is incorrect?

• A) At acquisition date, contingent consideration is measured at fair value.
• B) Where the contingent consideration is classified as equity, there is no remeasurement required on settlement.
• C) Subsequent adjustments to contingent consideration affect the goodwill calculated at acquisition date.
• D) Changes in the amount of an expected cashflow where the contingent consideration represents a liability that is within the scope of AASB 137/IAS 37 are accounted for through profit and loss.

---

Definitions:

Law of Diminishing Returns

This economic law states that after a certain point, successive increments of a single factor of production yield progressively smaller increases in output.

Competitive Market

A market environment where numerous producers and consumers interact, leading to price competition and variety in products.

Marginal Revenue Product

The additional revenue generated from employing one more unit of a resource, such as labor or capital, in the production process.

Purely Competitive

Characterizes a market structure where many competitors sell identical products, ensuring no single seller can influence market prices.