The Financial Statement Effects of Eliminating the Pooling-of-Interests Method of Acquisition Accounting

Provided by: American Accounting Association
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Accounting standard setters have become increasingly concerned with the perceived manipulation of financial statements afforded by the pooling-of- interests (pooling) method of accounting for corporate acquisitions. This study provides a basis for evaluating restrictions on the pooling method by analyzing the financial statement effects on pooling acquisitions made by public corporations over the period 1992 through 1997. Using these acquisitions it quantifies the scope of the pooling problem, estimates the financial statement repercussions of eliminating the pooling method, and examines the effects of restricting pooling accounting to business combinations meeting various mergers of equal restrictions.

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