The concept of a controlling financial interest refers directly to any
situation in which a shareholder owns the majority of a company's
voting stock. This is typically 50% or more shares of a company.
However, a shareholder doesn't have to have the majority ownership
of a company in order to have a controlling interest so long as he or
she owns a significant portion of voting shares.
Pushdown accounting is a method of accounting that is used for an
acquisition or a merger of companies. This method makes the
purchase of another company easier because it values the other
company at the purchase price rather than using the company's
historical cost. That said, an acquiree can elect to use pushdown
accounting. An acquiree can elect to use pushdown accounting in its
separate financial statements when an event happens in which the
acquirer obtains control of the acquired entity. The acquiree can elect
pushdown accounting simply by holding an election to apply
pushdown accounting before any financial statements are ready to be
issued for the reporting period.
While it is very important to understand all the implications of
pushdown accounting, the most important thing to consider before
making the election is any kind of possible tax effects. Negative tax
effects need to be taken into account and need to be weighed to
make sure the accounting method is worth it. This is really important
because the decision to apply pushdown accounting to a certain
event is irreversible.
References:
Christensen, T. E., Cottrell, D. M., & Budd, C. (2019).
Advanced
Financial Accounting
(12th ed.). McGraw Hill LLC.
Dietrich, N. (2016, December 20).
Pushdown Accounting -
McClintock & Associates
. McClintock & Associates.
https://www.mcclintockcpa.com/pushdown-
accounting/#:~:text=An%20acquiree%20can%20elect%20to,control
%20of%20the%20acquired%20entity.
Smith, T. (2007, January 11).
What Is a Controlling Interest?
Investopedia.
https://www.investopedia.com/terms/c/controllinginterest.asp
