1.2 Pushdown Accounting
When an entity obtains control of a business, a new basis of accounting is established in the acquirer’s
financial statements for the assets acquired and liabilities assumed. Sometimes the acquiree prepares
separate financial statements after its acquisition. Use of the acquirer’s basis of accounting in the
preparation of an acquiree’s separate financial statements is called “pushdown accounting.”
In November 2014, the FASB issued ASU 2014-17, which gives an acquiree the
option of applying pushdown accounting in its separate financial statements when it
undergoes a change in control. Before the issuance of ASU 2014-17, the guidance on
pushdown accounting only applied to SEC registrants and was based on bright lines
that provided opportunities for structuring and the potential for misapplication.
ASU 2014-17, which was codified into the “Pushdown Accounting” subsections of ASC
805-50, now provides both public and nonpublic entities with authoritative guidance
on applying pushdown accounting. Appendix A of this publication addresses the application of pushdown
accounting.