In addition to Glamdrings' reply there are occasions when an aircraft is transferred to another unit that is not on the same system or perhaps lies outside controlled airspace etc.
As part of the co-ordination process the receiving unit will provide a new squawk code from their allocation (this allows everyone working radar in the locality to quickly identify who is working what!). It is usual practice for the offering controller to change the squawk and validate it before handing the aircraft over to the next unit (because the offering controller already has the identity of the aircraft in the first place).
So in the above example the offering controller would be using option E (observing the change) and the receiving controller would be using option B (recognising!)