If a Company Uses Pooling-Of-Interests to Account for a Merger

question 42

Multiple Choice

If a company uses pooling-of-interests to account for a merger, which of the following are true?
I. Prior year's statements must be restated as if merged companies had always been one company.
II. Net income of combined companies will probably be lower than net income of two separate companies added together.
III. No goodwill will be recorded.
IV. Assets of acquired company will be recorded on acquirer's books at their fair value.

• A) II, III and IV
• B) I, II and III
• C) II and IV
• D) I and III

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Definitions:

Court Precedent

A legal decision made by a court that serves as an example or rule to be followed in future similar cases.

Insurance

A financial agreement where individuals or entities receive protection or reimbursement against losses from an insurer, in exchange for premium payments.

Exculpatory Clause

A contract term that releases one party from liability for harm or damage that might occur to another party, often found in service agreements and waivers.

Insane Person

Refers to an individual with severe mental illness to the point where they cannot understand the nature or consequences of their actions.