Chapter 16 - Solution Manual

Eitf d 097 paragraph sequence 3 for example if a

Info icon This preview shows pages 13–15. Sign up to view the full content.

View Full Document Right Arrow Icon
acquired. [EITF D-097, paragraph , sequence 3] ] [For example, if a parent company purchases all the outstanding minority interest of a majority- owned subsidiary (which has no public debt outstanding) in a single transaction or a series of related and anticipated transactions which includes the subsequent issuance of subsidiary shares to new investors, the SEC staff believes that push-down accounting would be required to be applied in the subsidiary's financial statements, regardless of the size of the minority interest sold to new investors. The SEC staff believes that push-down accounting would be required even though the subsidiary became wholly owned for only a short time and there was a plan for the subsidiary to issue shares subsequent to becoming wholly owned. [EITF D-097, paragraph , sequence 4] ] [In applying SAB 54 to specific facts and circumstances, a registrant must distinguish between transactions resulting in only a significant change in (recapitalization of) a company's ownership (for example, as the result of an initial public offering for which push-down accounting is not required) and purchase transactions in which the company becomes substantially wholly owned and for which push-down accounting is required. [EITF D-097, paragraph , sequence 5] ] [For purposes of determining whether a company has become "substantially wholly owned" as the result of a single transaction or a series of related and anticipated transactions in which investors acquire ownership interests, the SEC staff believes that it is appropriate to aggregate the holdings of those investors who both "mutually promote" the acquisition and "collaborate" on the subsequent control of the investee company (the collaborative group). FN1 That is, the SEC staff believes that push-down accounting is required if a company becomes substantially wholly owned by a group of investors who act together as effectively one investor and are able to control the form of ownership of the investee. [EITF D-097, paragraph , sequence 6] ] [FN1 Topic No. D-97 Footnote 1—A collaborative group is not necessarily the same as a control group as defined in SEC Staff Announcement: Issue No. 88-16, "Basis in Leveraged Buyout Transactions." [EITF D-097, paragraph , sequence 7] ]
Image of page 13

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
350 [The SEC staff believes that under a "mutual promotion and subsequent collaboration" model, a member of a collaborative group would be any investor FN2 that helps to consummate the acquisition and works or cooperates with the subsequent control of the acquired company. For purposes of assessing whether an investor is part of a collaborative group, the SEC staff believes that a rebuttable presumption exists that any investor investing at the same time as or in reasonable proximity to the time others invest in the investee is part of the collaborative group with the other investor(s). Determination of whether such a presumption is rebutted necessarily will involve the consideration of all pertinent facts and circumstances. Among the factors considered by the SEC
Image of page 14
Image of page 15
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern