Reference no: EM132473987

Problem - In the absence of definitive guidelines from the FASB, companies that have applied pushdown accounting in the separate financial statements of substantially wholly owned subsidiaries have used accounting techniques analogous to quasi-reorganizations or to reorganizations under the U.S. Bankruptcy Code. That is, the restatement of the subsidiary's identifiable assets and liabilities to current fair values and the recognition of goodwill are accompanied by a write-off of the subsidiary's retained earnings; the balancing amount is an increase in additional paid-in capital of the subsidiary.

Instructions - What is your opinion of the foregoing accounting practice? Explain.