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The Future of Accounting for Business Combinations


  • Tweedie, Sir David
  • Whittington, Geoffrey


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.

Suggested Citation

  • Tweedie, Sir David & Whittington, Geoffrey, 2000. "The Future of Accounting for Business Combinations," Accounting and Finance Discussion Papers 00-af45, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camafp:00-af45
    Note: L

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    More about this item


    Mergers; Acquitions; Accounting; Pooling; Goodwill;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance


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