Pooling of Interest

Pooling of interest can be defined as an accounting method of combining balance sheets of two different business entities or two different corporations together at the point of merger or acquisition. Pooling of interest is a method that allows companies to combine their balance sheet, their assets and their common interests for their ease at the time or mergers. The alternative method to that or pooling of interest method is the purchase method in which the purchasing or the acquiring company purchases the assets of the absorbed or the acquired company to its fair market value.

However there is a major difference between the pooling of interest method and the purchase method. The pooling of interest method allows a business entity or a corporation to evaluate the assets of the acquired company at market value where as the purchase method of absorbing, acquiring or merger only allows the evaluation of the assets by the book value of the assets of the acquired company. This will help the companies that are merging with each other or the companies that are acquire the other companies to acquire their intangible assets as well such as the brand recognition and the reputation that the acquired company has earned so far.


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