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Push Down Accounting


Push down accounting is an accounting method often used in corporate acquisitions where the financial statements of the subsidiary reflect the costs the parent company incurred during the acquisition. This method ‘pushes down’ the parent’s acquisition costs to the subsidiary, which may include the revaluation of assets and liabilities, and potentially any goodwill or debt incurred. This method provides a more accurate picture of the subsidiary’s standalone financial position post-acquisition.


The phonetics for “Push Down Accounting” are: /pʊʃ daʊn əˈkaʊntɪŋ/

Key Takeaways

Certainly, here are the main takeaways about Push Down Accounting:“`

  1. Parent’s cost basis: This method of accounting involves the new basis of the accounting records of the acquired company (subsidiary) being pushed down from the parent company (acquirer). This leads to the carrying amount of the subsidiary’s identifiable assets, liabilities, and non-controlling interest to be adjusted to fair value at the acquisition date. Any goodwill or bargain purchase gain that arises from the business combination is also recognized in the subsidiary’s financial statements.
  2. Financial reporting: Push down accounting is primarily used for preparing consolidated financial statements. It provides more accurate information about the net assets of the subsidiary post-acquisition. It also provides useful information about the return on investment to the parent company and prospective investors.
  3. Stakeholders: Important to note that this method might not be beneficial for the stakeholders of the subsidiary if there is a significant amount of goodwill involved, as this might result in lower net assets and therefore potentially lower dividends. Also, it could mean that the company will show a greater liability on its balance sheet due to the revaluation at the parent company’s cost, which may impact the subsidiary’s borrowing capacity.



Push Down Accounting is important in the world of business and finance, primarily during the occurrence of mergers and acquisitions. This accounting method involves the new owners “pushing down” their acquisition costs onto the financial statements of the subsidiary or acquired entities, thereby showing the updated or “fair value” of the assets and liabilities, instead of their historical cost. The significant aspect here is that it not only aids in the better representation of the financial health and value of the subsidiary post-acquisition, but also assists in the accurate calculation of various ratios and financial parameters, essential for stakeholders such as investors and creditors. Furthermore, the depreciation and amortization based on the new values can impact the subsidiary’s future earnings, thus showing the real cost and impact of the acquisition on the subsidiary’s performance.


Push Down Accounting is an accounting method typically employed in corporate acquisitions or buyouts where the financial accounts of the subsidiary are adjusted to reflect the parent company’s perspective. The key purpose of this method is to present a more accurate and comprehensive picture of the newly formed entity’s financial standing. In such scenarios, the parent company pushes down its acquisition cost, including any goodwill or write-ups, to the acquired entity’s balance sheet. This approach helps in creating a clearer representation of the investment cost and the related debt structure, thereby assisting in a more precise evaluation of the financial health of the new entity.Push Down Accounting comes into play when determining the depreciation and amortization expenses for the acquired company in subsequent years. These are now based on the purchase consideration rather than the historical cost. In cases where the purchase consideration is greater than the previous book value of the net assets, the resulting increase in asset values and creation of new intangible assets like goodwill would cause a boost in the acquired company’s depreciation and amortization expenses. These adjustments significantly impact the earnings before interest, tax, depreciation, and amortization (EBITDA) calculations, which are often used to evaluate the financial performance of a company. Therefore, Push Down Accounting aids in making meaningful company comparisons and more informed investment decisions post-acquisition.


Push Down Accounting is a method of accounting for the purchase of a subsidiary at the purchase cost rather than its historical cost. Here are three real-world examples.1. Procter & Gamble’s Acquisition of Gillette: In 2005, Procter & Gamble acquired Gillette. During this acquisition, P&G used push down accounting to reflect the assets and liabilities of Gillette at fair value, ensuring a more accurate depiction of the financial health of the consolidated entity. This method allowed them to assess the profitability and efficiency of the newly merged company more accurately by including the acquisition debt in Gillette’s balance sheet.2. Kraft’s Acquisition of Cadbury: In 2010, Kraft Foods acquired Cadbury in a deal estimated to be around $19 billion. The assets and liabilities of Cadbury were revalued and reflected in the consolidated financial statement of Kraft using push down accounting. This gave an accurate depiction of the entity’s financial condition post-acquisition, involving changes to the value of assets and depreciation rates, and gave stakeholders a better understanding of the value created through the acquisition.3. Google’s Acquisition of YouTube: Google acquired YouTube at a value of $1.65 billion in 2006. During this acquisition, Google used push-down accounting so that YouTube’s balance sheet would better reflect the economic realities of the purchase price. This method helped in showing the accurate profitability of YouTube under Google’s management, as it takes into account the fair value of the acquired assets and liabilities. It was also helpful for evaluating the return on the investment Google made to acquire YouTube.

Frequently Asked Questions(FAQ)

What is Push Down Accounting?

Push Down Accounting is a method of accounting in which the financial records of a subsidiary are adjusted to reflect the cost of the parent company’s acquisition of the subsidiary, instead of the subsidiary’s historical cost.

When is Push Down Accounting used?

Push Down Accounting is generally used when a parent company acquires a majority stake in a subsidiary, typically when the acquisition is over 90-95%.

What is the purpose of Push Down Accounting?

The purpose of Push Down Accounting is to present the subsidiary’s financial statements as if the subsidiary directly incurred the liabilities and costs of the acquisition. This can provide a clearer picture of the subsidiary’s financial performance in relation to its parent company.

How does Push Down Accounting affect the balance sheet of a subsidiary?

In Push Down Accounting, the assets and liabilities of the subsidiary are restated at fair value, which can substantially alter the subsidiary’s balance sheet. In addition to this, the goodwill or any bargain purchase gain arising from the acquisition transaction is also recorded on the subsidiary’s balance sheet.

Does the use of Push Down Accounting have any disadvantages?

One potential disadvantage is that the subsidiary’s financial statements might no longer reflect its standalone financial health. If a large amount of debt is associated with the acquisition, then the subsidiary’s balance sheet may appear overleveraged, which can impact stakeholders’ decisions.

Is Push Down Accounting accepted by all financial reporting standards?

Not all. The acceptance and use of Push Down Accounting may vary depending on the accounting standards applicable. For instance, under US GAAP, if an entity’s stock ownership changes and results in an entity becoming a subsidiary, it may be necessary to apply push-down accounting. However, under IFRS, push-down accounting is not specifically addressed and its use is generally not common.

Can Push Down Accounting impact a company’s operating result?

Yes. Since Push Down Accounting can result in a change in the carrying value of an entity’s assets and liabilities, it can lead to increased depreciation and amortization, consequently impacting the company’s operating results.

What is the impact of Push Down Accounting on minority interests?

Minority stakeholders’ interests might be affected as the acquired debt and related costs of the acquisition are pushed down to the subsidiary level. When a change in value is applied, it applies to the whole of the asset or liability, not just the parent’s share of it. This might not provide a fair view of the economic reality of the minority’s stake in the net assets, which could potentially affect their decisions.

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