What is Pushdown Accounting?

Pushdown accounting is a technique used by an acquirer to record the purchase of another entity. Under this approach, the accountant uses the acquiring entity's basis of accounting to prepare the financial statements of the acquired entity. This means that the assets and liabilities of the acquiree are updated to their fair values as of the acquisition date. Thus, the recorded book value of each acquired asset and liability is its fair value as of the acquisition date.

If the purchase price exceeds the fair value of the acquired assets and liabilities, the excess is recorded as goodwill. These changes appear in the financial statements of the newly-acquired entity. Once this option is applied, the change is irrevocable.

Pushdown accounting is not required for entities that are not registrants with the Securities and Exchange Commission (i.e., public entities).