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.
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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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
1.833(j) (sales that may give rise to suits under Section 16(b) of the Securities Exchange Act of 1934) and 1.83-3(k) (transfer restrictions under the pooling-of-interests accounting rule), a substantial risk of forfeiture may be established only through a service condition or a condition related to the purpose of the transfer; (2) in determining whether a substantial risk of forfeiture exists based on a condition related to the purpose of the transfer, both the likelihood that the forfeiture event will occur and the likelihood that the forfeiture will be enforced must be considered; and (3) except as specifically provided in Sec.
Utilizing pooling-of-interests accounting, it was possible for companies to pay a large off-the-book premium with their own stock to buy an inflated target (King & Neil 2000).
Most deals were stock-for-stock transactions, accounted for using pooling-of-interests accounting. Integrating the acquisitions wasn't emphasized, as each acquired unit was evaluated on its own performance.
The first concerns the so-called elimination of pooling-of-interests accounting. This is a good example of two old adages: "Watch what we do, not what we say," and "To achieve your goals, change the definitions."
Pooling-of-interests accounting simply combines all assets of the merged firms at their current book value.
However, banks and other commercial and industrial corporations are just as strongly opposed to eliminating pooling-of-interests accounting as the high-tech firms.
And, since differences in the form of consideration exchanged appear to be the major rationalization supporting pooling-of-interests accounting, one can conclude that pooling accounting is of questionable validity."
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.
The effective date for eliminating pooling-of-interests accounting for business combinations is June 30, 2001; transactions entered into after that date must use the purchase method.
Beyond the revised treatment of goodwill, however, the FASB held fast in the face of vigorous opposition to eliminating the popular pooling-of-interests accounting.
Pooling-of-interests accounting would no longer be permitted.
"Everyone Out of the Pool," (JofA, May00, page 45) lists several reasons the FASB has for eliminating pooling-of-interests accounting: less information, value disregards, financial statement user comparison difficulties and earnings distortions.