A.5 Subsequent Election to Apply Pushdown Accounting

An acquiree that does not elect to apply pushdown accounting before the financial statements are issued (SEC filer) or are available to be issued (other entities) may subsequently elect to apply pushdown accounting to its most recent change-in-control event in a later reporting period. However, such a later election is a change in accounting principle and the acquiree would be required to apply the guidance on a change in accounting principle in ASC 250 in such circumstances, including all relevant disclosure requirements. We believe that an election to apply pushdown accounting would generally be preferable. ASC 250-10-45-5 requires that an entity “report a change in accounting principle through retrospective application . . . to all prior periods,” unless doing so would be impracticable. We would expect entities that elect pushdown accounting on a later date to apply it retroactively to the acquisition date since the parent generally would be expected to have maintained the records for all prior periods.

An SEC registrant that elects a voluntary change in accounting principle must file a preferability letter with the SEC (i.e., a letter from the entity’s independent accountant indicating why the new accounting principle is preferable). Such a letter must be included in the registrant’s first filing under the Securities Exchange Act of 1934 (i.e., Form 10-Q or Form 10-K) after the date of the accounting change.