Document Type
Article
Publication Date
1972
Abstract
In recent months, the Commission has noted an increasing number of business combinations which appear to meet the individual requirements for pooling-of-interests accounting set forth in Accounting Principles Board Opinion No. 16 but which do not conform with the overriding thrust of that Opinion which requires that a combination represent a sharing of rights and risks among constituent stockholder groups if it is to be a pooling of interests. Paragraphs 28, 45 and 47 of that Opinion clearly provide that such a sharing of risk is an essential element in poolings, and the specific requirements set forth in paragraphs 46, 47 and 48 should certainly not be construed as a formula which, if followed with precision, may be used to overcome an essential concept which underlies the entire Opinion. Despite the clarity of the Opinion in articulating the need for a sharing of risk, a number of registrants and their auditors have proposed to account for combinations which did not meet this basic requirement as poolings. Accordingly, the Commission has concluded that any confusion regarding this matter should be laid to rest. It is the Commission's understanding that the Accounting Principles Board has authorized its staff to issue an interpretation providing that a business combination should be accounted for as a purchase if its consummation is contingent upon the purchase by a third party of any of the common stocks to be issued. Including such a contingency in the arrangement of the combination, either explicitly or by intent, would be considered a financial arrangement which is precluded in a pooling under Opinion 16. The Commission endorses this interpretation.
Relational Format
article
Series Title
Accounting Series Release No. 130;Securities Act of 1933 Release No. 5312;Securities Exchange Act of 1934 Release No. 9798;Public Utility Holding Company Act of 1935 Release No. 17712;Investment Company Act of 1940 Release No. 7395
Recommended Citation
United States. Securities and Exchange Commission, "Pooling-of-interests accounting" (1972). Federal Publications. 201.
https://egrove.olemiss.edu/acct_fed/201