A.7 Subsidiary’s Election to Apply Pushdown Accounting

A subsidiary of an acquiree is not constrained by the acquiree’s or a higher-level subsidiary’s decision of whether to apply pushdown accounting upon a change-in-control event. If multiple entities are acquired in a business combination, the acquiree and any of its subsidiaries independently have the option to apply pushdown accounting in their separate financial statements.

The Background Information and Basis for Conclusions of ASU 2014-17 points out that the Task Force “considered, but ultimately rejected, a view in which an [acquiree] must elect to apply pushdown accounting in order for its subsidiaries to be able to elect the option to apply pushdown accounting” because “subsidiaries should reflect their parent’s basis.” The Task Force rejected that view on the basis that “each entity has different users and their perspectives may be different from one another.” Therefore, each entity within the group of acquired entities “should be allowed to separately evaluate whether pushdown accounting applies to their separate financial statements.”