When a contingent consideration arising from a business combination is classified as a liability, how is any difference between the original estimate of the amount to be paid and the actual amount paid 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 direct adjustment to consolidated retained earnings.
D) As an adjustment to consolidated contributed surplus.

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Leslie Olivera · Accepted Answer

Final Answer : B, Explanation :  When a contingent consideration from a business combination is classified as a liability and there's a difference due to a change in circumstances, it's treated as an adjustment to an estimate, affecting net income. This reflects the change in the fair value of the contingent consideration.

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