F3- Push Down accounting

Question 1

Describe push down accounting.

F3-33

Answer 1

Reports assets and liabilities at fair value in separate financial statements or subsidiary.

In effect, consolidation adjustments are “pushed down” into the records.

• Assets and liabilities are adjusted to fair market value at date of acquisition.
• Retained earnings of the subsidiary are transferred to pain-in capital.
• Net income of each subsidiary includes depreciation, amortization, and interest expenses based on fair values rather than historical cost.
• The SEC requires push down accounting for each “substantially wholly owned subsidiary.”