Volume 10, No. 10

Accounting For Business Combinations: It'll Never Be The Same


Accounting For Business Combinations: It'll Never Be The Same:  In August 1996, the FASB added to its agenda the reconsideration of accounting principles governing business combinations. All existing principles were considered fair game, including the sacred cow of pooling-of-interests accounting. Expected time frame: three years. In June 2001, the FASB finished its new rules on accounting for business combinations - a couple years later than it expected, but perhaps worth the wait. The accounting for business combinations is described in Statement No. 141, and it leaves companies with only one way to record a combination: as a purchase of one firm by another. The accounting principles for handling goodwill and acquired intangible assets were revamped in the simultaneously issued Statement 142. Taken together, these two statements will probably have a bigger effect on more future balance sheets than any other standard issued in recent memory unless companies simply stop acquiring each other. The net result for investors: balance sheets that might say something about earnings sources.

Comments are closed.

Powered by WordPress. Designed by WooThemes