Whilst writing testing instructions for MDL-63496 I have discovered that purpose and category inheritance do not work in the intended way.

Where the purpose, or the category, are set to 'Inherit', this should inherit from the parent context.
What is happening is that it is inheriting from the parent context type.
Consider the following scenario:

Purposes

1. Example - retention period 5 years
2. Some other - retention period 3 years
3. Education - retention period 1 year

Activity explicitly set to "Inherit"

A site has a purpose set to "Example"
A course category has a purpose set to "Some other"
A course within it has a purpose set of "Education"
A forum within that course is configured to "Inherit"

Expected

The forum is actively set to Inherit
The forum will inherit from the course, and have an effective value of "Education" (1 year)

Actual

The forum inherits from the course, and has an effective value of "Education" (1 year)

Activity instance not explicitly set

A site has a purpose set to "Example"
A course category has a purpose set to "Some other"
A course within it has a purpose set of "Education"
A forum within it has no purpose set
The default for activity modules is set to "Inherit" (the default).

Expected

The forum will default receive the "Inherit" value from the activity module default.
The forum will then inherit from the course, and have an effective value of "Education" (1 year)

Actual

The forum gains the "Inherit" value from the default for activity modules.
The forum inherits from the the default for courses (Not set to "Inherit")
The forum inherits from the the default for course categories (Not set to "Inherit")
The forum inherits from the the default for the Site (Set to Example (5 years))

Explanation

When calculating the inheritance via the defaults system, we are looking up the context level tree rather than inheriting from the parent. i.e. we first check the forum itself, then fall back on the default for the context_module, then the default for context_course, then context_coursecat, and finally context_system.

The "Inherit" option should behave identically in both scenarios.