F3 - Push Down Accounting

Question 1

Describe push down accounting.

Answer 1

Reports assets and liabilities at fair value in separate financial statements of 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 paid-in capital.
• Net income of each subsdiary includes depreciation, amortization, and interest expense based on fair values rather than historical cost.
• The SEC requires push down accounting for each “substantially wholly owned subsidiary”.