Reference no: EM132461381

Question 1: In 2010, CI had purchased a subsidiary of ABC Inc. and agreed to pay additional future consideration for the purchase (the consideration would take the form of additional CI shares). The additional consideration was a function of the profitability of the subsidiary. The more profitable the subsidiary, the more shares that CI would issue as consideration. Given that CI's shares are highly volatile, CI and ABC agreed that the number of shares to be issued should be based on the average price per share in the three months prior to the future issuance date of the shares. So far, the subsidiary has been performing above expectation.