When a Contingent Consideration Arising from a Business Combination Is

question 31

Multiple Choice

When a contingent consideration arising from a business combination is classified as a liability, how is any change in its fair value as a result of new information about the facts and circumstances that existed at the acquisition date accounted for if identified and measured within one year subsequent to the acquisition date?

• A) As an adjustment to the consideration paid for the subsidiary.
• B) As an adjustment to an estimate included in the determination of net income.
• C) As a direct adjustment to consolidated retained earnings.
• D) As an adjustment to consolidated contributed surplus.

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Definitions:

Controller

The executive in charge of the accounting function in most companies. The controller generally reports to the CFO.

Financial Relationships

The analysis and assessment of the connections between various financial metrics and entities, including investments, expenses, revenues, and profits.

Financial Theory

A branch of economics that aims to understand and explain how financial markets operate, the structure of capital markets, and the pricing of financial instruments.

Economics

The social science that studies how people use scarce resources to produce valuable commodities and distribute them among different people.