If a company uses pooling-of-interests to account for a merger, which of the following are true?
I. Prior year's statements must be restated as if merged companies had always been one company.
II. Net income of combined companies will probably be lower than net income of two separate companies added together.
III. No goodwill will be recorded.
IV. Assets of acquired company will be recorded on acquirer's books at their fair value.

Question

Quizplus · Accepted Answer

I is true, as pooling-of-interests requires restatement of prior year's statements. 
II is true, as pooling-of-interests usually results in lower net income than adding the two separate companies. 
III is true, as no goodwill is recorded under pooling-of-interests. 
IV is false, as assets of acquired company are recorded at their book value, not fair value, under pooling-of-interests.

If a Company Uses Pooling-Of-Interests to Account for a Merger