Look at the following statements below that deal with the pooling of interest, w

Question

Look at the following statements below that deal with the pooling of interest, which of the statements below is incorrect?

A: Pooling combinations that are created before 2002 are left intact going forward

B: Pooling of interests could be used when one company used its own stock as consideration to acquire all of another company's stock

C: Book values of the assets and liabilities of both of the companies became the book values reported by the combined entity

D: Any previous business combination(s) originally accounted for under the pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations

Explanation / Answer

Solution:

Under pooling of interest method, The combined assets of the merged entity are consolidated using book using book value and acquisitions completed through use of equity only. This method of acquistion is discontinued in 2001 and Pooling combinations that are created before 2002 are left intact going forward.

Therefore statement A, B and C found to be correct.

Incorrect statement is statement D i.e. " Any previous business combination(s) originally accounted for under the pooling of interests accounting method will now be accounted for under the acquisition method of accounting for business combinations"

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