pooling of interests

(redirected from Pooling-of-Interests Accounting)

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 ?
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.
Most deals were stock-for-stock transactions, accounted for using pooling-of-interests accounting.
The first concerns the so-called elimination of pooling-of-interests accounting.
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.
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.
It is interesting that all of the large mergers were structured to achieve pooling-of-interests accounting (pooling).
The United States is perhaps one of the last countries in the world to still permit pooling-of-interests accounting.
A true merger -- where ownership interests are continued, no change in control of the company's assets or liabilities transpires, no culmination of an earnings process occurs, and risks and rewards of net assets obtained are similar to those given up -- warrants pooling-of-interests accounting.
As it happened, I had considered pooling-of-interests accounting most intimately in Barron's, October 8, 1990.