Biography of Pooling of Interest Method in Accounting for Amalgamations


Affiliations

  • Wipro Limited, Bangalore, India

Abstract

'Pooling of interest method' of accounting for amalgamations is a unique concept among accounting practices. Its uniqueness is in ignoring the historical cost concept, a fundamental concept for recording transactions in accounting. In this practice the evidence of cost provided by the transaction of amalgamation is ignored in accounting for the amalgamation. Defined in Indian Accounting Standard 14 para 10 as "Under pooling of interest method, the assets, liabilities and reserves of the transferrer company are recorded by the transferee company at their existing carrying amounts."

This article attempts to find the logic that could have given birth to the 'pooling of interest method' in accounting for Amalgamations. In tracing the logic, the following five steps are taken. To start with, identify the first transaction of business combinations. Second, examine how these early business combinations could have been accounted for. Third, analyze how 'pooling of interest method' accounting for business combinations evolved in United States. Fourth, trace how 'pooling of interest method' of accounting reached India. Finally conclude by the evaluating the reasons for the demise of 'pooling of interest method' in accounting for amalgamations and examine in what form could 'pooling of interest method' survive going forward.


Keywords

No Keywords.

Subject Discipline

Financial Management

Full Text:

References

Amalgamation is the term used in UK and India for “merger of two or more companies whose shareholders are issued with appropriate number of shares in the new companyâ€.

Asia-Pacific M&A Bulletin: Setting the pace for an outstanding year, Mid year 2006 review of Price Waterhouse Coopers.

Reported in Deccan Herald page 15 on December 25, 2006.

Does M&A Pay? A survey of evidence for decision makers, by Robert F Bruner.

Roll R. (1986) ‘The hubris hypothesis of Corporate Takeovers†Journal of Business 59; 197-216.

Frank R. Rayburn and Ollie S. Powers, “A history of Pooling of Interest Accounting for business combinations in the United States,†Accounting Historians Journal, December 1991, page 155-192.

Page 940-941, Wealth of Nations, by Adam Smith, published by Bantam Classics, Edition March 2003.

Page 26, The Company, A short history of a revolutionary idea, by John Micklethwait and Adrian Wooldridge published by Weidenfeld and Nicolson, 2003.

Page 439, The Wheels of Commerce: Civilization and Capitalism, 15th-18th Century Volume 2, by Fernand Braudel, Phonex Press, edition 2002.

Page 39, The Corporation that Changed the World.

Refer website www.oldest-share.htm referred on December 5, 2006.

Page 7,

Page 135, Millionaire, The Philanderer, Gambler, and Duelist who invented modern Finance by Janet Gleeson, Published by Simon and Schuster.

Martin Lipton, Merger Waves in the 19th, 20th and 21st Century, in the Davies Lecture, Osgoode Hall Law School, York University, September 14, 2006.

Tabulated from Martin Lipton’s The Davies Lecture, Osgoode Hall Law School.

Page 8, Irrational exuberance, by Robert J Shiller, Broadway Books, 2000 edition.

Page 224, Manias, Panics, and Crashes: A history of financial crises by Charles P Kindleberger, fourth edition.

Page 385, an extract from Accounting Standards by John Blake, reproduced in Mergers et al: Issues, implications and case laws in corporate restructuring, by S. Ramanujam.

Page 202, Chronology: The Development of Company Financial Reporting in Great Britain 1844-1977 by C. W. Nobles and R. H. Parker, in the book, The Evolution of Corporate Financial Reporting by Lee and Parker.

Page 100, The Acc.

From rivalry to mergers.,’ Economist December 2, 2005.

Page 101, The Acc.

Page 58,

Page 24, Company Financial Statements by T A Lee, in the book The Evolution of Corporate Financial Reporting by Lee and Parker

Page 101,

Page 9, Devil take the hindmost: A history of financial speculation by Edward Chancellor, published by Penguin Group, June 2000 edition.

The End of pooling envy by Claude P Lanfrancon and Darroch A Robertson, in Ivey Business Journal, July/August 2000.

The origin and emergence of double account system: an example of accounting innovation, by J R Edwards, in Abacus, Volume 21, Number 1, 1985.

Page 197, Chronology: The development of Company Financial Reporting in Great Britain 1844-1977, in the book Evolution of Corporate Financial Reporting, by Lee and Parker.

Page 209, Chronology: Developments in the Establishment of Accounting Principles in the United States, 1926-1978, in the book Evolution of Corporate Financial Reporting, by Lee and Parker.

Inferenc.

Extract from the US Supreme Court judgment in Interstate Commerce Commission vs. Goodrich Transit Company, 224 US 194, (1912).

Page 867, Guide to the Companies Act, A Ramaiya fourteenth edition, 1998.

Speech of SEC Chief Accountant William W Werntz reported in The history of pooling-of-interests method in the jurisdictions of G4+1 member organizations.

Regulation: the fight which saved the nation by Richard Freeman and Marsha Freeman published in American Almanac, February 2001.

Page 183, The Great Crash 1929, by John Kenneth Galbraith.

Page 22, Accounti.

Para 1 of the Indian Companies Act, 1882.

Page 8, Guide to Companies Act, A Ramaiya, fourteenth edition, 1998.

Page 11, An analy.

Page 2370, Guide to the companies Act, A Ramaiya, fourteenth edition, 1998.

Bank M&A: Stability and Synergy, by A Vasudevan, Business Line November 11, 2004.

Website www.hll.com; in the section heritage, subsection milestones.

Page 384, Mergers et al: Issues, implications and Case laws in Corporate Restructuring, by S. Ramanujam.

Page 2560, Guide to the Companies Act, A Ramaiya, fourteenth edition 1998.

Page 31, The History of the Pooling of interests methods in the Jurisdictions of G4 +1 member organizations.

Page 1, Guide to the Companies Act, 1956, A Ramaiya, fourteenth edition, 1998.

Page 12, The history of the pooling of interest method in the Jurisdictions of G4+1 Member organizations.

Page 1, of Earnest & Young’s, guidance note for Clients and Friends on FASB 141 and 142 dt, February 2004.


Refbacks

  • There are currently no refbacks.