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.

BREAKING DOWN '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. International Financial Reporting ...

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

    The combination of two firms of about the same size to form a ...
  4. Mergers And Acquisitions - M&A

    A general term used to refer to the consolidation of companies. ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Acquisition Premium

    The difference between the estimated real value of a company ...
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. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  10. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
RELATED FAQS
  1. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
  2. How do dividend distributions affect additional paid in capital?

    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  3. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  2. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  3. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  4. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  5. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  6. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!