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How should hard account for million adjustment

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Question 1: On 1 April 2017 HARD acquired 75% of WATER's equity shares by means of a share exchange and an additional amount payable on 1 April 2017 that was contingent upon the post-acquisition performance of WATER. At the date of acquisition HARD assessed the fair value of this contingent consideration at £4.2 million but by 31 March 2018 it was clear that the amount to be paid would be only £2.7 million. How should HARD account for this £1.5 million adjustment in its financial statements as at 31 March 2018?

Option 1 : Debit current liabilities/Credit goodwill

Option 2 : Debit retained earnings/Credit current liabilities

Option 3 : Debit goodwill/Credit current liabilities

Option 4 : Debit current liabilities/Credit retained earnings

Reference no: EM132532913

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