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Appendix A — Pushdown Accounting

A.16 Financial Statement Presentation

A.16 Financial Statement Presentation

The application of pushdown accounting and the presentation of a new basis of accounting in a subsidiary’s separate financial statements are akin to the termination of an old reporting entity and the creation of a new reporting entity. Therefore, it is not appropriate to combine preacquisition and postacquisition periods in a single set of financial statements. In both the financial statements and any footnote disclosures presented in tabular format, the preacquisition and postacquisition periods are separated by a vertical “black line.” The periods before the acquisition are labeled as the “predecessor” periods and the periods after the acquisition and the application of pushdown accounting are labeled as the “successor” periods. Since the application of pushdown accounting is akin to the creation of a new reporting entity, the predecessor entity’s equity structure is not carried forward and the new equity structure is presented in the successor period. The footnotes to the financial statements should include separate footnote disclosures for the preacquisition and postacquisition periods. In addition, the footnote disclosures should include a description of the acquisition to alert users that pushdown accounting was applied and that, accordingly, the acquiree’s results of operations and cash flows in the predecessor and successor periods are not comparable.