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Appendix A — Pushdown Accounting

A.17 Identifying When a Newly Formed Entity to Effect an Acquisition Is the Acquirer

A.17 Identifying When a Newly Formed Entity to Effect an Acquisition Is the Acquirer

While ASU 2014-17 simplified the application of pushdown accounting, it did not resolve certain long-standing practice issues related to whether a newly formed entity (commonly called a “newco”) should be identified as the acquirer in a business combination. Entities will often establish a newco to effect the acquisition of a business. If the newco is identified as the acquirer and is the reporting entity, it would apply acquisition accounting, rather than pushdown accounting. Therefore, recognizing a new basis for the assets acquired and liabilities assumed in the newco’s financial statements would not be optional.