Push-down Accounting is a method of accounting that is used when a company acquires another company and the acquired company’s financial statements are consolidated into the acquiring company’s financial statements. In push-down accounting, the acquired company’s financial statements are “pushed down” into the financial statements of the acquiring company, rather than being presented as a separate entity.
Push-down accounting is typically used when the acquired company is a subsidiary of the acquiring company, and the acquiring company has a controlling stake in the subsidiary. In this case, the acquiring company is considered to be the “parent” company, and the subsidiary is considered to be the “subsidiary.”
The purpose of push-down accounting is to provide a more accurate representation of the financial position and performance of the consolidated entity, as it includes the financial information of both the parent company and the subsidiary.
There are a few key points to keep in mind when it comes to push-down accounting:
It is used when a company acquires another company and the acquired company’s financial statements are consolidated into the acquiring company’s financial statements.
It is typically used when the acquired company is a subsidiary of the acquiring company and the acquiring company has a controlling stake in the subsidiary.
The purpose of push-down accounting is to provide a more accurate representation of the financial position and performance of the consolidated entity.
Examples:
- Company XYZ is a publicly traded company that acquires Company ABC, a privately held company. Company ABC becomes a subsidiary of Company XYZ, and Company XYZ has a controlling stake in the subsidiary. In this case, push-down accounting would be used to consolidate the financial statements of Company ABC into the financial statements of Company XYZ.
- Company DEF is a privately held company that acquires Company GHI, a publicly traded company. Company GHI becomes a subsidiary of Company DEF, and Company DEF has a controlling stake in the subsidiary. In this case, push-down accounting would be used to consolidate the financial statements of Company GHI into the financial statements of Company DEF.
In conclusion, push-down accounting is a method of accounting that is used when a company acquires another company and the acquired company’s financial statements are consolidated into the acquiring company’s financial statements. It is typically used when the acquired company is a subsidiary of the acquiring company and the acquiring company has a controlling stake in the subsidiary. The purpose of push-down accounting is to provide a more accurate representation of the financial position and performance of the consolidated entity.