25-4 An acquiree shall have the option to apply pushdown accounting in its separate financial statements when an acquirer — an entity or individual — obtains control of the acquiree. An acquirer might obtain control of an acquiree in a variety of ways, including any of the following:
- By transferring cash or other assets
- By incurring liabilities
- By issuing equity interests
- By providing more than one type of consideration
- Without transferring consideration, including by contract alone as discussed in paragraph 805-10-25-11.
25-5 The guidance in the General Subsections of Subtopic 810-10 on consolidation, related to determining the existence of a controlling financial interest shall be used to identify the acquirer. If a business combination has occurred but applying that guidance does not clearly indicate which of the combining entities is the acquirer, the factors in paragraphs 805-10-55-11 through 55-15 shall be considered in identifying the acquirer. However, if the acquiree is a variable interest entity (VIE), the primary beneficiary of the acquiree always is the acquirer. The determination of which party, if any, is the primary beneficiary of a VIE shall be made in accordance with the guidance in the Variable Interest Entities Subsections of Subtopic 810-10, not by applying the guidance in the General Subsections of that Subtopic relating to a controlling financial interest or the guidance in paragraphs 805-10-55-11 through 55-15.
25-6 The option to apply pushdown accounting may be elected each time there is a change-in-control event in which an acquirer obtains control of the acquiree. An acquiree shall make an election to apply pushdown accounting before the financial statements are issued (for a Securities and Exchange Commission (SEC) filer and a conduit bond obligor for conduit debt securities that are traded in a public market) or the financial statements are available to be issued (for all other entities) for the reporting period in which the change-in-control event occurred. If the acquiree elects the option to apply pushdown accounting, it must apply the accounting as of the acquisition date.
Loss of Control of a Subsidiary
Company A has a wholly owned subsidiary, X. Company A sells 80 percent of its shares in X to the public in an initial public offering. The public shareholders are widely dispersed, and no individual shareholder acquires more than 3 percent of X’s shares. Company A concludes that it no longer controls X.
Company A loses control of X upon the sale of X’s shares to the public. Because no entity or individual obtains control of X, a new basis of accounting cannot be established in X’s separate financial statements.