NORWALK, Conn. -- The Financial Standards Accounting Board here has taken another step forward in its two-year-long effort to make the corporate reporting of mergers and acquisitions more transparent to investors.
ss combinations in fourth-quarter 2003.
According to a project summary prepared by FASB staff, the new standards are intended to largely end the widely used pooling method of accounting -- in which the assets and liabilities of the combined companies are added together, often retroactively, resulting in pro forma results in financial statements that predate the actual measure.
The FASB is working to replace pooling with the purchase method of accounting -- in which the acquiring company treats the acquired company as an investment, and continues to report its results as a separate entity until, if ever, the acquired company is integrated into the acquirer's business, the summary noted.
The rule changes are intended not only to make financial statements clearer to investors, but also to coordinate U.S. standards with those being developed by the International Accounting Standards Board, a London-based organization that is creating a global set of accounting standards.
