pooling of interests

Pooling of Interests

An accounting method, used in mergers and acquisitions, where the balance sheet items of the two companies are simply added together.

Notes:

The opposite of pooling of interests is the purchase acquisition method. Pooling of interests is the preferable method to use because it doesn't result in the creation of goodwill. This in turn leads to higher reported earnings.

Certain criteria must be met before the pooling of interests method can be used.

See also: Acquisition, Merger, Purchase Acquisition

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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.

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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.