The Controller's Roundtable is a web site with a vast array of information, discussions and applications that are of great use to both reporting and operations people.
They recently compiled the results of a discussion group on push down accounting. For those not familiar with this term, when a company completes a share acquisition, they will end up paying more that the acquired company's book value for assets acquired and liabilities assumed.
Companies sometimes “push down” the fair value to the acquired subsidiary. On consolidation, nothing changes. The changes affect internal reporting and segment reporting, where asset values are sometimes used for management accounting purposes in calculating asset and earnings based ratios. The additional depreciation or amortization of hard assets and intangibles would affect the subsidiary's earnings.
On the question of when push down accounting is used, the following was observed from a recent Controller's Roundtable discussion:
- 72% pushed down purchase price allocations (including goodwill, intangibles, and fixed asset fair value changes) to acquired businesses.
- 22% said they generally push down the purchase price allocations in most cases, but this could change depending on whether it's a foreign or domestic acquisition.
Check out the Controllers Roundtable.