FASB Proceeds with Plan to Ban Poolings of Interest

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The Financial Accounting Standards Board on Tuesday formally issued its proposal to ban the pooling-of-interests method of accounting for mergers that is favored by banking companies.

The FASB said it would take comments on the plan through Dec. 7 and hold public hearings early next year in New York and San Francisco. The agency, which first announced its preference for purchase accounting on April 21, said the mergers affected would be those initiated after a final decision is reached late next year.

"When two different accounting methods are used for what is essentially and economically the same transaction, it is confusing to investors," FASB Chairman Edmund L. Jenkins said in a statement. "We believe that the purchase method of accounting gives investors better information about the initial cost of the transaction and the acquisition's performance over time than does the pooling-of-interests method."

Banks overwhelmingly prefer to use the method the FASB is trying to eliminate. …