Consolidating journal entries
If an entity decides to change its election at a later date, it will be considered a change in accounting principle in accordance with Topic 250 on accounting changes and error corrections and may require retrospective restatement of financial statements (ASC 805-50-25-7).
Additional provisions of the new pushdown accounting guidance include the following: shows the impact of pushdown accounting on the financial statements of an acquiree.
The consideration transferred in a business acquisition usually comprises assets transferred, liabilities incurred (including contingencies), and the amount of equity that acquiree has issued to acquirer.
When the fair value of identifiable net assets received exceeds fair value of consideration transferred, negative goodwill (or bargain purchase gains) is created.
EA concludes that, based on ASC 805, it should use the fair value of the underlying exchange transaction to establish a new accounting basis for transaction.
Therefore, EA accounts for all acquired assets and liabilities at fair value.
The following is a summary of four important provisions in the new guidance.
First, ASU 2014-17 states that pushdown accounting applies to stand-alone financial statements of an acquiree when an acquirer obtains control; this threshold is consistent with Topic 805.