Which of the Following Is False Regarding Contingent Consideration in Business

question 92

Multiple Choice

Which of the following is false regarding contingent consideration in business combinations?

• A) Contingent consideration payable in cash is reported under liabilities.
• B) Contingent consideration payable in stock shares is reported under stockholders' equity.
• C) Contingent consideration is recorded because of its substantial probability of eventual payment.
• D) The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer.
• E) Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment.

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Definitions:

Insurer

A company or entity that provides insurance coverage to individuals or organizations against financial loss in exchange for premium payments.

Claim

A formal assertion of one's right to money, property, or legal remedy due to harm or wrongdoing experienced.

Bad Faith

An intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealings.

Denies Coverage

The act of an insurance company refusing to pay out a claim on an insurance policy.