A.6 Election to Apply Pushdown Accounting Is Irrevocable

While an entity can elect to apply pushdown accounting in a subsequent reporting period, it cannot reverse the application of pushdown accounting in financial statements that have been issued (SEC filer) or are available to be issued (other entities). In addition, if an acquiree elects to apply pushdown accounting and that acquiree is subsequently acquired by another entity, the historical cost basis of the acquiree is based on the “pushed down” amounts. The new acquirer cannot revert to the acquiree’s historical cost basis that existed before the election to apply pushdown accounting.

According to the Background Information and Basis for Conclusions of ASU 2014-17, the Task Force decided that an entity should be allowed to apply pushdown accounting on a later date if, for example, the investor mix changes significantly and “pushdown accounting would be more relevant to the current investors.” Nonetheless, the Task Force decided that entities should be prohibited from subsequently reversing the application of pushdown accounting. Because an acquirer applies acquisition accounting to establish a new basis of accounting in its consolidated financial statements and subsequently accounts for the related assets and liabilities under GAAP, the acquiree would generally have the information to apply pushdown accounting on a later date. However, once a new basis is established in the acquiree’s separate financial statements, the historical cost basis for the acquiree’s assets and liabilities would often not be available.