Note: As of July 2001, under FASB Statement No. 141, all new business combinations must be accounted for using the purchase method. The following coverage of the pooling-of-interests method of accounting for business combinations is provided since the financial information related to such combinations will appear for many years into the future.
A pooling of interests is a combination that was required to meet very strict criteria to ensure a true bonding of existing interests. Since the company being acquired had to fully cooperate to ensure the pooling treatment, it was unlikely that the pooling method could ever be applied to a hostile takeover. When the pooling criteria were met, it was held that there had not been a purchase or a sale and, thus, there was no cause to recognize fair values. The negotiation of the combination did consider fair values of assets and liabilities; they just were not recorded.
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