Standards of Financial Accounting-Rule 141 Revised

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: Standards of Financial Accounting-Rule 141 Revised

1 . Introduction

New rules come because of the need for change to address the changing needs of business . This seeks expound on this idea by explaining the differences between the old accounting standard under rule 141 and the new rule 141 as revised on for mergers and consolidations . The first rule for the purpose of this is alternatively found as SFAS 141 while the new rule as SFAS 141R

2 . Analysis and

Discussion

The new rule no longer allows the recording of acquisition under the pooling of interest method in accounting for business combination Under the pooling of interest method or uniting of interest , the stockholder of the combining enterprises combine into one entity of the whole of all the net assets and operations to achieve a continuing mutual sharing of the risks and benefits of the combined enterprise but neither party may be identified as the acquirer . The new rule , now under SFAS 141R , prescribes only accounting for all business combinations using a single method called acquisition , where one party called the acquirer is always identified as acquiring the other entity called the acquiree . Despite the seeming similarity of the use of acquisition method the revised standard includes procedures that could change immediate and future income statement and balance sheet in connection with business combinations

One significant change under the new rule is that the acquirer may not anymore designate...