A controlling financial interest is a financial interest that is made up of
more than 50% of the outstanding stock. A controlling financial
interest gives the owner of it a majority say/ voting rights. In other
words, if you had the controlling financial interest in a company, you
would always have the majority vote.
According to Daniel Liberto on investopedia.com, "Pushdown
accounting was formerly mandatory when the parent acquired at
least 95% ownership of another company. If the stake ranged
between 80% to 95%, pushdown accounting was an option. If the
stake was smaller, it was not permitted" (Liberto, D. 2021). Recently,
however, this has changed. Since 2014, the percent rule has been
eliminated and push down accounting was made optional for
companies with any percentage of ownership. So, an acquiree would
just need to elect push down accounting.
Before electing push down accounting, I would say it is important to
consider how the revaluation of assets and such will skew the income
statement. As stated in the textbook, "Other users may prefer not to
use push-down accounting, instead preferring the historical basis to
avoid distorting income statement trends as a result of increased
amortization and depreciation expense" (Push-Down Accounting,
2021). Thus, it is important to consider how the revaluation will affect
the income statement trends. If it is drastic, you would need to
consider then how that will play into the future and decide if it is
worth it.
References:
Liberto, D. (2021)
Pushdown Accounting
. investopedia.com
https://www.investopedia.com/terms/p/push-down-accounting.asp
Pushdown accounting
. Viewpoint. (2021).
https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/busine
ss_combination/business_combination__28_US/chapter_10_other_b
us/101_chapter_overview_US.html
