Illustration 1: Push-down accounting – acquisition-date
On January 1, 2020, Parent Co. acquired 80% interest in Sub Co. by issuing
10,000 shares with fair value of ₱15 per share and par value of ₱10 per share.
NCI is measured at proportionate share. The individual financial statements
immediately before the acquisition are shown below:
Parent
Sub
Cash
80,000
34,000
Inventory
80,000
46,000
Equipment, net
360,000
80,000
Total assets
520,000
160,000
Liabilities
100,000
12,000
Share capital
240,000
100,000
80,000
-
Retained Earnings
100,000
48,000
Total liab & equity
520,000
160,000
Share premium
The carrying amount of Sub Co. net assets approximate their fair values except
the following:
Carrying
Fair values
FVA
amount
Inventory
46,000
62,000
16,000
80,000
96,000
16,000
126,000
158,000
32,000
Equipment, net (4yrs
remaining)
Totals
Requirement: Prepare the consolidated statement of financial position using pushdown accounting
Solutions:
Parent Co. records the acquisition in its separate books as follows:
Jan
Investment in subsidiary
1,
Share capital
2020
Share premium
150,000
100,000
50,000
Goodwill is computed as follows:
Consideration transferred
150,000
NCI in the acquiree (180K X 20%)
36,000
Previously held equity interest in the acquiree
Total
186,000
Fair value of subsidiary’s net assets
(180,000)
Goodwill
6,000
The entry in Sub’s separate books is as follows:
Jan
Goodwill
6,000
1,
Inventory
16,000
2020
Equipment
16,000
Retained earnings
48,000
Push-down capital
86,000
Subsidiary is viewed as a new entity. The pre-acquisition retained earnings are
eliminated and the accounts are remeasured at acquisition-date fair values.
The “push-down capital” is presented as an equity account in the subsidiary’s
separate financial statements, but this will be eliminated in the consolidated
financial statements.
The individual financial statements after recording the entries are shown below:
Before acquisition
Parent
After acquisition
Sub
Parent
Sub
Cash
80,000
34,000
80,000
34,000
Inventory
80,000
46,000
80,000
62,000
-
-
150,000
-
360,000
80,000
360,000
96,000
-
-
-
6,000
520,000
160,000
670,000
198,000
Investment in subsidiary
Equipment
Goodwill
Total assets
Accounts payable
100,000
12,000
100,000
12,000
Share capital
240,000
100,000
340,000
100,000
80,000
-
130,000
-
Push-down capital
-
-
-
86,000
Retained earnings
100,000
48,000
100,000
-
Total liab & equity
520,000
160,000
670,000
198,000
Share premium
The consolidation journal entry is as follows:
Jan
Share capital – Sub
100,000
1,
Push-down capital
86,000
2020
Investment in subsidiary
150,000
Non-controlling interest
36,000
The consolidated statement of financial position is shown below:
ASSETS
Cash
114,000
Inventory
142,000
Equipment
456,000
Goodwill
Total Assets
6,000
718,000
LIABILITIES AND EQUITY
Liabilities
112,000
Share capital
340,000
Share premium
130,000
Retained Earnings
100,000
Owners of parent
570,000
Non-controlling interest
Total Equity
Total Liabilities and equity
36,000
606,000
718,000
Whether or not the push-down accounting is used, the consolidated accounts
should result to the same amounts.
Illustration 2: Push-down accounting – subsequent date
Use the same information above.
The December 31, 2020 individual financial statements show the following:
Statement of financial position
As at December 31,2020
Parent
Sub
Cash
196,000
158,000
Inventory
210,000
30,000
Investment in subsidiary
150,000
-
Equipment, net
280,000
72,000
-
6,000
Total assets
836,000
266,000
Liabilities
146,000
60,000
Share capital
340,000
100,000
Share premium
130,000
-
Push-down capital
-
86,000
Retained Earnings
220,000
20,000
Total liab & equity
836,000
266,000
Goodwill
Statement of profit or loss
For the year ended December 31, 2020
Parent
Sub
Revenues
600,000
240,000
Expenses
(480,000)
(220,000)
120,000
20,000
Profit
The consolidated financial statements are as follows:
Dec 31,
Share capital – Sub
100,000
2020
Push-down capital
86,000
Dec 31,
2020
Investment in subsidiary
150,000
Non-controlling interest
36,000
Retained earnings – Sub
Retained earnings – Parent
Non-controlling interest
20,000
16,000
4,000
The consolidated financial statements are shown below:
ASSETS
Cash
354,000
Inventory
240,000
Equipment, net
352,000
Goodwill
Total Assets
6,000
952,000
LIABILITIES AND EQUITY
Liabilities
206,000
Share capital
340,000
Share premium
130,000
Retained Earnings
236,000
Owners of parent
706,000
Non-controlling interest
Total Equity
40,000
746,000
Total Liabilities and equity
952,000
Revenues
840,000
Expenses
(700,000)
Consolidated profit
140,000
Profit attributable to:
Owners of parent
Non-controlling interest
136,000
4,000
140,000