pooling of interests

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Pooling of interests

An accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the purchase method, which uses market value. The merging entities' financial results are combined as though the two entities have always been a single entity.

Pooling of Interests

A way to record a merger or acquisition where the assets and liabilities are added together and netted. The pooling of interests method does not create good will and therefore results in higher earnings for newly merged or acquired entity. The pooling of interest method contrasts with the purchase acquisition method.

pooling of interests

An accounting method for combining unchanged the assets, liabilities, and owners' equity of two firms after a merger or combination. Before being discontinued in 2001, pooling was a preferred method of accounting for mergers because it generally produced the highest earnings calculations for the surviving company. Compare purchase method.
References in periodicals archive ?
The first proposal, Not-for-Profit Organizations: Mergers and Acquisitions, eliminates the use of the pooling-of-interests method of accounting by not-for-profit organizations and requires the acquisition method for all mergers and acquisitions by a not-for-profit organization.
In conjunction with its issuance of IFRS 3, the IASB also revised international accounting standards (IAS) 36, Impairment of Assets, and 38, Intangible Assets; together they require, among other things, that all business combinations within the scope of IFRS 3 be accounted for using the purchase method and that the pooling-of-interests method no longer be used.
Also, 82 percent of the respondents indicated that the elimination of pooling-of-interests accounting will not impact their overall M&A activity, but that the new standards add complexity to structuring deals and the valuation of intangible assets.
Currently, there are two acceptable methods of accounting for business combinations -- the purchase method and the pooling-of-interests method.
While this article focuses upon recent practical problems associated with the pooling-of-interests method of accounting, the FASB cannot realistically deal with this issue without addressing the entire area of business combinations including the primary nemesis--goodwill.
Statement 141, Petrone said, eliminated the pooling-of-interests method of accounting and supersedes Opinion 16 in its entirety, though it carries through that opinion's guidance on the purchase method of accounting.
The statement requires use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating use of the pooling-of-interests method.
The United States is perhaps one of the last countries in the world to still permit pooling-of-interests accounting.
One of the key conclusions reached in that paper was that the pooling-of-interests method of accounting should be eliminated and that the purchase method be used to account for all business combinations.
Now, industries such as technology and banking, where pooling-of-interests acquisitions have dominated in recent years, will be ripe for a new wave of acquisitions using cash.
1999 proposed statement, Business Combinations and Intangible Assets, the Financial Accounting Standards Board has tentatively decided to eliminate the pooling-of-interests method of accounting for business combinations.
On September 7, FASB issued a two-part exposure draft, Business Combinations and Intangible Assets, which proposed eliminating the pooling-of-interests method of accounting for business combinations.