Push Down Accounting

Updated on March 22, 2024
Article byWallstreetmojo Team
Edited byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What is Push Down Accounting?

Push-down accounting is the method by which the acquirer’s accounting basis about the assets and liabilities taken over is pushed down to the acquiree’s books. The acquiree’s books are also adjusted to reflect the value of its assets and liabilities considered in the acquirer’s consolidated financial statements, i.e., the book value of assetsBook Value Of AssetsBook Value of Assets is the asset's value in the books of records of a company or an institution at any given instance. Assets Book Value Formula = Total Value of an Asset – Depreciation – Other Expenses Directly Related to it read more and liabilities of the acquiree would be adjusted to their fair values as considered by the acquirer.

Key Takeaways

  • Pushdown accounting is a technique that involves adjusting the financial statements of a subsidiary to reflect the assets, liabilities, revenues, and expenses of the parent company as if they had always been part of the subsidiary’s operation.
  • Goodwill, gain on bargain purchases, transaction costs, acquisition liabilities, and disclosures are the items that are considered under pushdown accounting. Therefore, this method eliminates the mismatch in the carrying values.
  • ASU 2014-17 provides an acquiree to utilize pushdown accounting in separate financial statements for every change-in-control occurrence.

ASU 2014-17 guides the application of pushdown accounting.

When to Apply Pushdown Accounting?

The acquiree can choose to apply to push down accounting whenever an entity obtains control of it. As per guidance in ASC 810 Consolidation, an entity is said to have obtained control when it

Such events where another entity obtains control of the acquireeAcquireeIn a merger and acquisition transaction, the acquiree, also known as the target company, is the company that is acquired by the acquirer.read more are referred to as ‘change-in-control events’ in ASU 2014-17.


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Option to Apply Push Down Accounting

An entity has the choice to apply to push down accounting each time a change-in-control event occurs. For example, Entity A was acquired by Entity B in January 20×7. Entity A is further acquired by Entity C in January 20×8. The following options are available to Entity A.

Change-in-Control Event #1
(Acquisition by Entity B)
Change-in-Control Event #2
(Acquisition by Entity C)
Opt to apply pushdown accountingOpt to not apply pushdown accounting
Opt to apply pushdown accountingOpt to apply pushdown accounting
Opt to not apply pushdown accountingOpt to apply pushdown accounting
Opt to not apply pushdown accountingOpt to not apply pushdown accounting

Measurement of Items under Push Down Accounting

#1 – Goodwill

#2 – Example

Entity B acquires Entity A in a transaction that results in the goodwill of $100 million as per ASC 805. Entity B estimates the relative benefit of its different reporting units from the synergies of the acquisition and allocates the goodwill as follows:

  1. Reporting Unit #1 – $25 million
  2. Reporting Unit #2 – $10 million
  3. Reporting Unit #3 – $65 (pertains to Entity A)

Hence, Entity B was assigned goodwill of $65 to Entity A in its consolidated financial statements. However, Entity A must recognize the entire amount of goodwill of $100 million in its separate financial statements while applying pushdown accounting.

#3 – Gain on Bargain Purchase

If the application of ASC 805 results in gain on bargain purchaseBargain PurchaseBargain purchase happens when a company acquires another company at a price less than the fair market value of its assets.read more being recognized in the acquirer’s books, the acquiree should not record the same in its separate financial statements.  Instead, the amount of bargain purchase gain is adjusted against the additional paid-in capital of the acquiree.

#4 – Transaction Costs

Transaction costs incurred by the acquirer to effect the acquisition are not pushed down to the acquiree.

Any liability incurred and recognized by the acquirer in the process of effecting the acquisition is to be recognized by the acquiree only if the acquiree must settle the liability or is jointly and severally obligated to settle the liability along with the acquirer.

#6 – Disclosures

Since pushdown accounting results in adopting a new accounting basis, the acquiree must present separately the financial results and statements about the pre-acquisition period and the post-acquisition period, separated by a vertical black line.

The acquiree should also disclose the basis for applying pushdown accounting and other relevant information to enable the users of the financial statements to evaluate the effect of applying pushdown accounting on the separate financial statements of the acquirer. Some of the relevant information to be disclosed include:

Example of Push Down Accounting

Entity B acquired a 100% stake in Entity A for $800 million. Entity A chooses to apply pushdown accounting in its separate financial statements. The fair value of Entity A’s identifiable assets acquired was to the tune of $800 mn and the fair value of liabilities assumed was $150 mn on the date of acquisition. The book value of the identifiable assets of Entity A as of the date of acquisition is $700, and that of liabilities assumed is $100 million. The common stock on the date of acquisition was $100 million, additional paid-in capital was $200 million, and retained earnings were $300 million.


Goodwill on the transaction = Consideration paid (-) Fair value of identifiable net assetsNet AssetsThe net asset on the balance sheet is the amount by which your total assets exceed your total liabilities and is calculated by simply adding what you own (assets) and subtract it from whatever you owe (liabilities). It is commonly known as net worth (NW).read more taken over

  • = $800 mn – $650
  • = $150 mn

The extent of adjustment to be made is calculated as follows:

ItemBook ValueFair ValueAdjustment Required

Entity A would record the following entry as part of push down accounting adjustments:

Example 1-1

Entity A’s financial statements would appear as follows:

Example 1-2

Advantages of Push Down Accounting

Disadvantages of Push Down Accounting

In the case of an acquiree with a significant non-controlling interestNon-controlling InterestIt generally projects curves on the data sets. For example, to forecast population growth, forming a non-linear relationship between time and growth.read more, the relevance of the financial statements prepared based on pushdown accounting to the users of the financial statements is affected.


  • ASU 2014-17 gives an acquiree the flexibility to apply to push down accounting in its separate financial statements for each change-in-control event.
  • The option available to the consolidated subsidiaries of the acquiree to opt for a pushdown accounting provides for the adoption of a more relevant basis of accounting.
  • Push-down accounting allows for a more consistent basis of accounting between the acquirer’s and acquiree’s books, easing the consolidation process to that extent.

Frequently Asked Questions (FAQs)

What are the effects of pushdown accounting?

Pushdown accounting results in higher company net assets on the acquisition date since the assets and liabilities are considered at fair value, and goodwill is validated. Therefore, this accounting method’s effects include increased transparency, tax implications, and stakeholder impact.

What is the alternative to pushdown accounting?

The historical cost basis is an alternative to pushdown accounting. It is a practical option for acquired entities with no valuable objective for a pushdown accounting financial statement presentation after a change-in-control event.

What is a pushdown accounting statement of cash flows?

The pushdown accounting of cash flows is the new accounting formation and reporting basis for an entity in separate financial statements based on a purchase transaction in the entity’s voting stock. As a result, a substantial change in the outstanding entity’s voting stock ownership.

This article has been a guide to What is Push Down Accounting & its Definition. Here we discuss when to apply pushdown accounting, examples, and measurement along with advantages and disadvantages. You can learn more about from the following articles –

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