The concept of a "controlling financial interest" is when one entity or
company holds majority ownership in a subsidiary's common stock.
This can also mean that the "controlling" entity/company has the
majority voting interest. Pushdown accounting is when a company
acquires another and chooses to revalue the subsidiary's assets and
liabilities to their fair value. The acquiring company must choose
pushdown accounting at the time that they record the acquisition in
their books. I think the most important consideration for pushdown
accounting is how the acquiring company plans to use the acquired
company's financial statements. If the subsidiary's financial
statements will remain separate and the acquiring company does not
intend to use those records to analyse trends, it may be a good
election. A controlling financial interest is defined as an investment of
50% or more of the voting equity of another entity. According to ARB
51, a company that holds 50% or more of the voting equity of an
affiliate is viewed as the controlling parent company and should
include the affiliate in its consolidated financial statement (Jones
08/2018).
Pushdown accounting is a method of accounting for the purchase of
another company at the purchase price rather than its historical cost.
The target company's assets and liabilities are written up or down to
reflect the purchase price. An acquiree can elect to use pushdown
accounting in its separate financial statements upon the occurrence
of an event in which the acquirer obtains control of the acquired
entity (Dietrich 12/2016)
Before applying pushdown accounting having all the facts and
circumstances into consideration is a most, you should include all
potential tax effects. The acquiree shall make the election to apply
pushdown accounting before the financial statements are available to
be issued (non-public entities) for the reporting period in which the
change of control event occurred. If elected, pushdown accounting
must be applied as of the acquisition date. The decision to apply
pushdown accounting to a specific change in control event is
irrevocable (Dietrich 12/2016).
Norbert F. Dietrich & McClintock & Associates Dec,2016
PUSHDOWN ACCOUNTING
