FASB Issues New Guidance on Pushdown Accounting
The Financial Accounting Standards Board (FASB) today issued Accounting Standards Update No. 2014-17, Business Combinations (Topic 805): Pushdown Accounting, a consensus of the FASB Emerging Issues Task Force. The Update provides guidance on whether and at what threshold an acquired business or not-for-profit organization can apply pushdown accounting.
Pushdown accounting occurs when an acquired organization uses the acquirer’s basis of accounting to prepare its financial statements. The Update provides an acquired business with the option to apply pushdown accounting in its separate financial statements when an acquirer obtains control of the acquired business. It also requires disclosures (similar to the disclosures provided by an acquirer under Topic 805, Business Combinations) that enable users of financial statements to better evaluate the effects of pushdown accounting.
The Board issued this Update to address the lack of guidance in GAAP for this topic, resulting in a lack of comparability among public, private, and not-for-profit organizations. (FASB.org)