Push Down Accounting
Barron's Accounting Dictionary:
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Push Down Accounting
Method of accounting in which the financial statements of a subsidiary are presented to reflect the costs incurred by the parent company in buying the subsidiary instead of the subsidiary's historical costs. The purchase costs of the parent company are shown in the subsidiary's statements.
| Purchasing System, Purchasing Power Loss (or gain), Purchase Order Lead Time | |
| Push-Through Method, Q Ratio, Qualification |
Investopedia Financial Dictionary:
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Push Down Accounting
In accounting for mergers and acquisitions, the convention of accounting of the purchase of a subsidiary at the purchase cost rather than its historical cost. This method of accounting is required under U.S. GAAP, but is not accepted in IFRS accounting standards. Since the subsidiary is consolidated into the parent company for financial reporting purposes, push down accounting appears the same on a firm's external financial reporting.
Investopedia Says:
It is sometimes helpful to think of push down accounting is as if a new company were started using borrowed funds. Both the debt, as well as the assets acquired, are recorded as part of the new subsidiary.
From a managerial perspective, keeping the debt on the subsidiary's books helps in judging the profitability of the acquisition. From a tax and reporting perspective, the advantages or disadvantages of push down accounting will depend on the details of the acquisition, as well as the jurisdictions involved.
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Barron's Accounting Dictionary
Dictionary of Accounting Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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