Business Combinations

Business Combinations

	IFRS	U.S. GAAP
Historically used accounting methods	(1) purchase method (2) pooling-of-interests method (*)	(1) purchase method (2) pooling-of-interests method
Currently required accounting methods	acquisition method	acquisition method

(*) AKA uniting-of-interests method under IFRS

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Pooling-of-interests method

• combined the ownership interests of the two firms and viewed the participants as equals--neither firm acquired the other.
• The assets and liabilities of the two firms were simply combined.
• The two firms are combined using historical book values.
• Operating results for prior periods are restated as though the two firms were always combined.
• Ownership interests continue, and former accounting bases are maintained.
• Fair values played no role in accounting for a business combination.
• The actual price paid was suppressed from the balance sheet and income statement.