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Appendix A — Pushdown Accounting

A.3 Option to Apply Pushdown Accounting Upon a Change in Control

A.3 Option to Apply Pushdown Accounting Upon a Change in Control

ASC 805-50
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:
  1. By transferring cash or other assets
  2. By incurring liabilities
  3. By issuing equity interests
  4. By providing more than one type of consideration
  5. 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.
Example A-1
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.
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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.