FAR 3-8: Combined Financial Statements & Push Down Accounting

Question 1

When are combined financial statements prepared?

Answer 1

• Companies are under common control
• Companies are under common management
• Unconsolidated subsidiaries are combined

Question 2

When preparing combined financial statements, identify the requirements

Answer 2

• Intercompany transactions & balances among these companies are eliminated
• NCIs treated like consolidated financial statements
• Capital stock & retained earnings are added across, NOT eliminated
• Income statements are added across

Question 3

Describe push down accounting

Answer 3

Reports assets & liabilities at FV in separate financial statements of subsidiary. In effect, consolidation adjustments are “pushed down” into the records.

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