Acquisition method and Pooling of interest method

IFRS

		Pooling of interest method	Acquisition method
		Acquirer	Acquirer
Target	Assets	Book value	Fair value
Target	Liabilities	Book value	Fair value
Acquirer	goodwill?	No	Yes

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(Question)
Regarding the prior purchase that was accounted for under the pooling of interests method, had Acquirer reporeted this purchase under the acquisition method:

A. the assets and liabilities of the purchased firm would not be included on Acquirer's balance sheet
B. balance sheet assets and liabilities of the purchased firm would have been reported at fair value.
C. reported goodwill could be less depending on the fair value of the identifiable assets and liabilities compared to their book values.

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Answer: B

The assets and liabilities of the purchased firm are included on the balance sheet of the acquiring firm under either method.

• Under the pooling method, there is no adjustment of balance sheet asset and liability values to their fair values (i.e. book value).
• There is no goodwill reported under the pooling method; the purchase price is not reflected on the balance sheet of the acquiring firm.
• Under the acquisition method, assets and liabilities acquired are reported at fair value at the time of the purchase.