Push Down Accounting

AAA

DEFINITION of '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 EXPLAINS 'Push Down Accounting'

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.

RELATED TERMS
  1. Dissenters' Rights

    State legislation that allows shareholders of a corporation the ...
  2. Acquisition Premium

    The difference between the estimated real value of a company ...
  3. Merger

    The combining of two or more companies, generally by offering ...
  4. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  5. International Financial Reporting ...

    A set of international accounting standards stating how particular ...
  6. Merger Of Equals

    The combination of two firms of about the same size to form a ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Investing Basics

    Analyzing An Acquisition Announcement

    These deals can make or break investors' returns. Find out how to tell the difference.
  3. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  4. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  5. Fundamental Analysis

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  6. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  7. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  8. Retirement

    How The Big Boys Buy

    Learn what those in-the-know look for when acquiring a company.
  9. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  10. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center