1
Q
Describe push down accounting.
A
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”.
