When a Contingent Consideration Arising from a Business Combination Is

question 20

Multiple Choice

When a contingent consideration arising from a business combination is classified as equity, how is any change in its fair value accounted for if the difference arises due to a change in circumstances?

• 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 memorandum entry indicating that additional shares had been issued.
• D) As an adjustment to consolidated contributed surplus.

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Definitions:

Degree Of Oligopolization

The extent to which a market or industry is dominated by a few large companies, limiting competition.

Collusion

An agreement between competing firms to control prices or exclude entry of a new competitor in the market, often in secret, to reduce competition and increase profitability.

Cutthroat Competition

An intense form of competition in a market where competitors aggressively undercut each other's prices or use other aggressive tactics to gain market share.

Concentration Ratios

Measures that indicate the extent to which a small number of firms dominate an industry or market.