Observations from the front lines

January 2013
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Observations from the front lines

At a glance

Push down accounting refers to instances in which an acquiring entity (or parent company) pushes its new basis down to the stand-alone financial statements of an acquired entity. The Emerging Issues Task Force (EITF) is in discussions regarding the circumstances that drive a change in accounting basis or an acquired entity's stand-alone financial statements. Potential changes could result in more instances where push down accounting is required.

Observations from the front lines provides PwC's insight on current economic issues, our perspective regarding the business impacts, and actions we have seen companies taking to effectively address those issues.

Standard setters revisit push down accounting requirements: January 2013

Push down accounting refers to instances in which an acquiring entity (or parent company) pushes its new basis down to the stand-alone financial statements of an acquired entity. The Emerging Issues Task Force (EITF) is in discussions regarding the circumstances that drive a change in accounting basis or an acquired entity's stand-alone financial statements. While the EITF has not yet reached consensus on the issue, it is important to understand that potential changes could result in more instances where push down accounting is required.

Highlights in this issue:

  • Understanding the accounting and financial reporting effects of a merger or acquisition is vital to effective post-deal modelling of the accretion and/or dilution impact of reported financial results
  • Potential changes to the push down rules could increase the likelihood of "stepping-up" assets to fair market value (FMV), resulting in future dilution to reported earnings per share (EPS)
  • In certain industries, push down accounting may have ancillary effects—such as on the level of reported equity or capital at financial institutions (e.g., regulatory capital)

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