Question Description
I’m trying to study for my Accounting course and I need some help to understand this question.
- Imagine you are the chief financial officer (CFO) of a corporation with plans to complete the acquisition of a critical subsidiary during the current year. Your chief executive officer (CEO) has requested a presentation to the Board of Directors describing the methods available to account for the acquisition internally and the best method for the company during the acquisition year. Please describe the value of each method identified in your presentation to the Board and support your recommendation with examples in a memo style to the Board of Directors.
- Compare the key differences between the U.S. GAAP and IFRS positions on both intangible research and development costs and tangible depreciable assets. Indicate the key benefits and drawbacks to financial statement users of each method (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
Attached.
Running head: PUSH-DOWN ACCOUNTING
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Push-Down Accounting
Institution affiliation
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PUSH-DOWN ACCOUNTING
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The Equity method of acquisition is applied in accounting for the investments of an
organization within the investee which is a separate entity. This method can be well applied when
the investor is said to have a great influence over the investee. In the said case, the investor is
aware of his share of the losses and profits from the investee for the time when these profits and
losses are reflected in the investee accounts. This implies that the method has the advantage of
ensuring that the investor shares all the periods with the investee, either profit making or loss
making period (Bilbao et al., 2015. When the subsidiary earns the income, the investor accrues it.
The second method is the initial value method. Under this ...