Push Down Accounting: A Descriptive Assessment

An examination is made of push down accounting, and evidence is offered that it is defensible within the existing framework of accounting. Push down accounting allows a subsidiary to record a transaction in a manner consistent with its parent company's consolidated financial statements. It requires the subsidiary issuing separate financial statements to restate the reported value of its assets based on the parent's purchase price. Critics of this technique argue that it lowers net income, damages consistency, and violates the existing structure of generally accepted accounting principles by writing up assets above cost to the reporting entity. Arguments in favor of the technique include the concept that, since an exchange has taken place between the old and new owners, a new cost basis has been established for the assets. Financial statements prepared using push down accounting usually are considered to furnish more relevant information than those prepared on the old basis of accounting.