The concept of a controlling financial interest refers directly to any
situation in which a shareholder owns most of a company's voting stock.
This is typically 50% or more shares of a company. However, a
shareholder does not 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 considered and need to be weighed to make sure the
accounting method is worth it. This is 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%2
0of%20the%20acquired%20entity.
Smith, T. (2007, January 11).
What Is a Controlling Interest?
Investopedia.
https://www.investopedia.com/terms/c/controllinginterest.asp
