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The Future of Accounting for Business Combinations

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  • Tweedie, Sir David
  • Whittington, Geoffrey
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    Abstract

    This paper explores the properties of pooling of interests (merger) accounting and purchase (acquisition) accounting as currently practised. It also compares these methods with variants of them that involve a greater use of fair values, the extent of valuation on a fair value basis and the treatment of different accounting methods. In particular, a greater use of fair values would reduce significantly the difference between the purchase and pooling methods and might also improve the extent to which the financial accounts reflect the economic reality of the business combination. However, the most consistent method of accounting for business combination, which would provide comparability across the full range of types of combination, is "fresh start" accounting which incorporates the recognition of all goodwill (and previously unrecognised intangible assets) in the combined group.

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    Bibliographic Info

    Paper provided by Faculty of Economics, University of Cambridge in its series Accounting and Finance Discussion Papers with number 00-af45.

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    Date of creation: Oct 2000
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    Handle: RePEc:cam:camafp:00-af45

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    Web page: http://www.econ.cam.ac.uk/index.htm

    Related research

    Keywords: Mergers; Acquitions; Accounting; Pooling; Goodwill;

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