Question

Push-down accounting is concerned with the Select one: a. recognition of goodwill by the parent. b. impact of the purchase on the separate financial statements of the parent. c. impact of the purchase on the subsidiary's financial statements. d. correct consolidation of the financial statements. e. recognition of dividends received from the subsidiary.

Answer 1

b. impact of the purchase on the separate financial statements of the parent

Step-by-step explanation:

Push down accounting is a book keeping accounting technique adopted by organizations when buying out another firm. The account of the person acquiring the firm is used to produce the financial statement of the newly acquired firm. It is an acceptable method in the Generally Accepted Accounting Principles (GAAP) in the United States but not acceptable under the IFRS standards (International Financial Reporting Standards.). Push down accounting offers the advantage of simplifying consolidation process of a parent company.

Answer 2

(C) impact of the purchase on the subsidiary's financial statements.

Step-by-step explanation:

Push-down accounting is a method of accounting required for ‘substantially wholly-owned subsidiaries’ and encouraged in other cases in preparation of their individual financial statements, that is, the acquirer’s accounting basis is used to prepare the financial statements of the purchased entity. It requires the subsidiaries to adopt the fair values of the subsidiary’s net identifiable assets as recognized by the acquirer as the new carrying value of its assets and liabilities.