3.3 Push-Down Accounting: 23FA-ACT506-1
.pdf
School
Colorado State University, Fort Collins**We aren't endorsed by this school
Course
ACT 506
Subject
Accounting
Date
Jan 11, 2025
Pages
2
Uploaded by ConstableDiscoveryKookabura13
8/10/23, 4:14 PM3.3 Push-Down Accounting: 23FA-ACT506-1Page 1 of 2https://csuglobal.instructure.com/courses/80139/pages/3-dot-3-push-down-accounting?module_item_id=40692593.3 Push-Down AccountingPush-down accountingis the practice of revaluing anacquired subsidiary’s assets and liabilities to their fairmarket values directly on the subsidiary’s books on thedate the acquisition is made. If this practice is followed, therevaluations are only recorded once on the date theacquisition is made. In other words, these revaluations arenot made on the consolidation worksheets each timeconsolidated financial statements are prepared.When push-down accounting is employed, the corresponding assets and liability accounts on asubsidiary’s books are revalued (debiting and crediting them, as required), and the balancing entryis to a revaluation capital account(which is normally a credit entry in the stockholders’ equitysection of the subsidiary’s books).To summarize push-down accounting, remember that:The new book values of the subsidiary’s assets, which may or may not include goodwill, areequal to the acquisition cost of the subsidiary; therefore, there are no differential results in theconsolidation and the consolidated worksheet process.The investment consolidation entry in the consolidation worksheet which is prepared right afterthe acquisition of the subsidiary and revaluation of its assets most likely includes the following:Debit capital or common stock—SubsidiaryDebit retained earnings—SubsidiaryDebit revaluation capital—SubsidiaryCredit investment in subsidiary common stockPush-down accounting is permissible and an option under an accounting standard issued by theFASB in 2014. When the FASB issued this standard, the Securities Exchange Commission (SEC)!!!!!!"#!
8/10/23, 4:14 PM3.3 Push-Down Accounting: 23FA-ACT506-1Page 2 of 2https://csuglobal.instructure.com/courses/80139/pages/3-dot-3-push-down-accounting?module_item_id=4069259eliminated any requirement or preclusion of the use of push-down accounting for registrantsbased on the percentage of ownership, thereby allowing the use of push-down accounting.Separate reporting by a subsidiary with the SEC is only required in a few cases. An example ofthis is when a subsidiary has publicly issued debt.