Consider the following footnote from a company's 2012 10K concerning an acquisition occurring during February of 2011 (The Company's yearend is January 31). The measurement period adjustment did not occur until January 2012.

Based on our initial internal estimate of contingent shares to be issued as part of this agreement, we had estimated that the total fair value of the common stock shares issued and contingently issuable for this transaction on the acquisition date was $367,500 (1,750,000 shares). The Company originally recognized a liability based on the acquisition date fair value of the acquisition-related contingent consideration based on the probability of the achievement of the targets stipulated in the Purchase Agreement. Based on the Company's estimation, an initial liability of $367,500 was recorded. Subsequently, we have reassessed our estimates and have determined that the initial terms of the agreement have not be met, and as the result, we have determined that there will be no additional shares contingently issuable under the terms of the Purchase Agreement and we have recorded an adjustment to revise our initial estimate of the purchase price in contemplation that no contingent consideration as was previously reported in our interim financial statements.

The following table summarizes the preliminary and final determination of the purchase price and fair value of AHI's assets acquired at the date of acquisiton:

As of January, 31, 2012, based upon the completion of the Company's annual goodwill impairment test, it was determined that the goodwill associated with the AHI acquisition has been impaired, and as the result, the Company has recorded an impairment loss of $210,000. The cause of the impairment was the result of contracts that were anticipated to result from this acquisition that have not materialized and management has decided to focus its energies on new initiatives.
Required:
A. When did the company record the measurement period adjustment? In your opinion, is this an appropriate use of a measurement period adjustment? Why or why not?
B. Assuming the company had not made a measurement period adjustment, prepare the journal entries that would have been needed to adjust the contingent consideration to zero and record the impairment of the intangibles. How does this differ from what the company actually reported?
C. What incentives might management have for presenting their financial statements as they did rather than using the method that you recorded in part B above? Support your answer with numbers and words.

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Preliminary Final Purchase price calculation: Common stock issued (1,000,000 shares) Contingent consideration (1,750,000 shares of common stock) 210,000 367,500 577,500 210,000 Fair value of total consideration 210,000 Allocation of purchase price 577,500 Intellectual property and technical know-how Goodwill 210,000 Fair value of total consideration 577,500 210,000