Chapter 16 - Solution Manual

For a transaction meeting the conditions in b in the

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[For a transaction meeting the conditions in (b) in the preceding paragraph, guidance is provided solely on whether pushdown accounting is required in the preparation of the acquired entity's financial statements. [EITF 86-09, paragraph ISSUE, sequence] ] Pushdown accounting is not required for entities that are not Securities and Exchange Commission (SEC) registrants. [EITF 86-09, paragraph DISCUSSION, sequence 17.1] ] New Basis of Accounting (Pushdown) 805-50-30-7 Pending Content: Transition Date: December 15, 2008 Transition Guidance: 805-10-65-1 [Because of such factors as the consideration of common ownership and changes in control, [EITF 87- 21, paragraph DISCUSSION, sequence] ][ a new basis of accounting is not appropriate for any of the following transactions that create a master limited partnership: [EITF 87-21, paragraph DISCUSSION, sequence 24.1] ] a. [A rollup in which the general partner of the new master limited partnership was also the general partner in some or all of the predecessor limited partnerships and no cash is involved in the transaction. [EITF 87-21, paragraph DISCUSSION, sequence 24.2.1] ][ Transaction costs in a rollup shall be charged to expense. [EITF 87-21, paragraph DISCUSSION, sequence 25.1] ] b. [A dropdown in which the sponsor receives 1 percent of the units in the master limited partnership as the general partner and 24 percent of the units as a limited partner, the remaining 75 percent of the units are sold to the public, and a two-thirds vote of the limited partners is required to replace the general partner. [EITF 87-21, paragraph DISCUSSION, sequence] ] c. [A rollout . [EITF 87-21, paragraph DISCUSSION, sequence] ] d. [A reorganization . [EITF 87-21, paragraph DISCUSSION, sequence] ]
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349 SEC Staff Announcement: Push-Down Accounting 805-50-S99-2 The following is the text of SEC Staff Announcement: Push Down Accounting. [Date Discussed: April 18-19, 2001 [EITF D-097, paragraph , sequence 1] ] [The SEC staff has received a number of inquiries regarding the facts and circumstances under which push-down accounting is required to be applied by SEC registrants. In Staff Accounting Bulletin No. 54, Application of "Pushdown" Basis of Accounting in Financial Statements of Subsidiaries Acquired by Purchase, the SEC staff indicated that it believes push-down accounting is required in "purchase transactions that result in an entity becoming substantially wholly owned." [EITF D-097, paragraph , sequence 2] ] [The SEC staff believes that the views in SAB 54 also should be followed in the context of a company that becomes substantially wholly owned as a result of a series of related and anticipated transactions. In determining whether a company has become substantially wholly owned, the SEC staff has stated that push-down accounting would be required if 95 percent or more of the company has been acquired (unless the company has outstanding public debt or preferred stock that may impact the acquirer's ability to control the form of ownership of the company), permitted if 80 percent to 95 percent has been acquired, and prohibited if less than 80 percent of the company is acquired. [EITF D-097, paragraph , sequence 3] ]
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