Washington D.C., Nov. 18,
2014 —
The Securities and Exchange Commission´s Office of the Chief Accountant and
Division of Corporation Finance today released a Staff Accounting Bulletin (SAB)
to rescind portions of the interpretive guidance included in its SAB Series for
what´s known as pushdown accounting.
In order to reflect private sector developments in U.S. Generally Accepted
Accounting Principles, the SEC´s Staff Accounting Bulletin No. 115 rescinds SAB
Topic 5.J. entitled New Basis of Accounting Required in Certain
Circumstances. The new bulletin brings existing guidance into
conformity with Accounting Standards Update No. 2014-17 — Business
Combinations (Topic 805): Pushdown Accounting, a consensus of the FASB Emerging
Issues Task Force, which was ratified by the Financial Accounting Standards
Board (FASB) on Oct 8, 2014.
The statements in SABs are not rules or interpretations of the Commission
nor are they published as bearing the Commission´s official approval. They
represent interpretations and practices followed by the Division of Corporation
Finance and the Office of the Chief Accountant in administering the disclosure
requirements of the federal securities laws.
* * *
Fact Sheet
Prior Guidance
- SAB Topic 5.J was issued on Nov. 3, 1983, and expressed the staff´s
views regarding the application of the "push down" basis of accounting in the
separate financial statements of entities acquired in purchase
transactions.
- SAB Topic 5.J indicated that when a purchase transaction results in an
entity becoming substantially wholly owned, a new basis of accounting should
be established in the acquired entity´s financial statements to reflect the
acquirer´s basis in the purchased assets and liabilities.
New Guidance
- The guidance in ASU No. 2014-17 provides an option to apply pushdown
accounting in the separate financial statements of an acquired entity upon the
occurrence of an event in which an acquirer obtains control of the acquired
entity.
Impact
- ASU No. 2014-17 impacts the stand-alone financial statements of an
acquired entity (subsidiary), however it does not change the requirement for
an acquirer (parent) to apply business combination accounting and record its
new basis in the acquired entity´s assets, liabilities, and non-controlling
interests in the acquirer´s consolidated financial statements.
- The change will facilitate the financial community´s transition to the
new guidance by providing timely communication of the staff´s views with
regards to the continuing applicability of its historical interpretive
guidance on pushdown accounting.