Pooling of Interests Law and Legal Definition
Pooling of interests is an accounting method used for describing the merger of two corporations, or companies. The merger of two corporations generally results when the balance sheet items of the two companies are simply added together. It is a tax free method where the balance sheets of two corporations are added together item by item. The combined assets of the merged entity are consolidated using book value.
The opposite of pooling of interests is the purchase acquisition method which uses the market value for consolidation. Most companies prefer pooling of interest method as against the purchase acquisition method, because reported earnings are higher under the pooling of interests method.
