How is accounting for a pooling of interests different from a purchase when business entities combine?
A)Assets and liabilities are not revalued when the pooling of interests is used.
B)Goodwill arises only when the pooling of interests method is used for business combinations.
C)Pooling of interests is used for international consolidations but never for domestic consolidations.
D)The purchase method is used only when less than 100% of an entity's voting shares are acquired.

Question

Quizplus · Accepted Answer

Accounting for a pooling of interests does not require the revaluation of assets and liabilities, as the method assumes that the two entities are merging as equals and there is no exchange of money or assets. In contrast, the purchase method does require the revaluation of assets and liabilities, as the acquiring entity is purchasing the other entity and there is a cost associated with the transaction.

How Is Accounting for a Pooling of Interests Different from a Purchase