Per the textbook, the FASB has not taken a position on the use of push-down acco

Question

Per the textbook, the FASB has not taken a position on the use of push-down accounting. Take a position on whether push-down accounting provides the most relevant information for both internal and external financial statement users. Provide support for your rationale. Compare the key differences between U.S. GAAP and IFRS’s position on both intangible research and development costs and tangible depreciable assets. Indicate the key benefits and drawbacks to financial statement users of each method (i.e., U.S. GAAP and IFRS). Next, determine the method that provides the most relevant information to financial statement users. Provide support for your rationale.

Explanation / Answer

In accounting, when entities are preparing accounts for acquisitions and mergers, the subsidiaries are usually purchased at their purchase cost rather than their historical cost. This technique of accounting is known as push down accounting.

This method is a requirement under US GAAP (Generally AcceptedAccounting Principles); however, it is not an acceptable method under the International Financial Reporting Standard (IFRS). On the entity’s financial statements, push down accounting appears the same since for the financial reporting purpose of the group structure, the subsidiary and parent company’s accounts are consolidated.

Push down accounting has two advantages:

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