Which of the following is true? When companies employ push-down accounting:
A)the subsidiary revalues assets and liabilities to their fair values as of the acquisition date.
B)a special account called Revaluation Capital will appear in the consolidated balance sheet.
C)all consolidation entries are made on the books of the subsidiary rather than in consolidated worksheets.
D)the subsidiary is not substantially wholly owned by the parent.

Question

Quizplus · Accepted Answer

When companies employ push-down accounting, the subsidiary revalues assets and liabilities to their fair values as of the acquisition date. This means that the subsidiary will record the assets and liabilities at their fair values or market values at the date of acquisition, instead of their historical costs or book values. This will result in a step-up or step-down in the value of the assets and liabilities, and will affect the subsidiary's equity. This equity difference is reflected in the consolidated financial statements. The other options are not true for push-down accounting.

Which of the Following Is True? When Companies Employ Push-Down