New Accounting Guidance For Business Combinations

Abstract

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 Business Combinations in June 2001. SFAS 141 supersedes Accounting Principles Board (APB) Opinion No. 16 Business Combinations and SFAS No. 38 Accounting for Preacquisition Contingencies of Purchased Enterprises. APB Opinion 16 created two acceptable methods of accounting for a business combination, the purchase and the pooling of interests methods. These two different methods often resulted in very different financial results for economically similar transactions.