Controlling Financial interest is when an individual or entity buys or otherwise obtains enough stock
to point where they become the largest holder in the company. This can happen through original
ownership and acquiring shares through purchase or trade. Push down accounting is simply adding
the obtained entity's assets and liabilities to the buyers or new owners’ financials, by pushing the
assets and liabilities together the new owner consolidates the financial statements into a single
comprehensive set. Although the most common event in implementing this method is upon a new
acquisition it is also possible to do this when the new company becomes the primary beneficiary of
a variable interest’s entity, meaning they have the controlling interest but not most shares. I believe
the most important consideration to decide on before making the election is understanding the
permanence of this decision. A controlling interest is when a shareholder holds most of a company's
voting stock. A shareholder does not have to have majority ownership in a company to have a
controlling interest if they own a significant portion of its voting shares. Having a controlling interest
provides a shareholder with significant power and influence within a company. Shareholders who
have a controlling interest are often able to direct the course of a company and make the most
strategic and operational decisions. The acquirer can elect pushdown accounting by obtaining
control of the acquired entity. Before making an election, it is important to consider the needs of
the users of an acquired company's financial statement.
References:
Smith, T. (2020, August 21). Controlling Interest. Investopedia.
https://www.investopedia.com/terms/c/controllinginterest.asp
(2022, April 30). 17.6 Pushdown Accounting [Review of 17.6] Pushdown Accounting]. Viewpoint.
https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_state
ment___18_US/chapter_17_business__US/176_pushdown_accounting.html#pwc-
topic.dita_91bd356e-fae4-4b23-bc0d-51fd46e91c08
Controlling Interest
https://www.investopedia.com/terms/c/controllinginterest.asp
Implications of Pushdown Accounting
https://www.cpajournal.com/2018/03/28/implications-pushdown-accounting/
