FASB to address pooling of interests.The United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. stands alone as perhaps the last country in the world to still permit pooling-of-interests accounting. Other countries either do not allow it at all or allow it only under certain narrow circumstances. "We're out of step with the world," G. Michael Crooch, chairman of the American Institute of CPAs accounting standards executive committee, told the Journal. Crooch is a partner of Arthur Andersen For the U.S. Supreme Court case commonly known as Arthur Andersen, see . Arthur Andersen LLP, based in Chicago, was once one of the "Big Five" accounting firms (the other four are PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG), performing , where he advises clients on mergers. The Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). has agreed to look at these rules and possibly make some changes in the next few years. "I think there will be a strong push for the United States to harmonize its accounting with the rest of the world," said Crooch. He pointed out that Securities and Exchange Commission Chief Accountant Michael Sutton Michael Sutton (born June 18, 1970, Los Angeles, California) is an American actor who is best known for playing the HIV-positive Stone Cates on the long running daytime serial General Hospital. He was nominated for two Emmy Awards in 1995 and in 1996 for that role. also is concerned about the current rules; Sutton told the Wall Street Journal that over 40% of his staff's time is spent figuring out which mergers qualify for pooling. Still, Crooch said any changes would be accompanied by a lot of debate because pooling is a popular method for merging entities. Companies' favored method "Merging companies like this treatment, as opposed to purchase accounting, because they don't write up assets or add goodwill to their balance sheets. Without pooling, goodwill has to be amortized against future earnings, and if companies record goodwill on the books, they end up with lower future earnings -- certainly an undesirable result for management." In fact, any changes in the pooling-of-interests treatment will have to be accompanied by changes in accounting for goodwill, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Crooch, who noted that if the FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). drastically restricts pooling rules, the major opportunity to avoid goodwill amortization will disappear. "The use of 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. is very important in some mergers," said Crooch, "and I have even had clients tell me, `If we can't account for this merger as a pooling of interests, we're not going to do it at all.'" The FASB is still discussing the issue; draft rules might not be issued for two years. |
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