Different between purchase methods and pooling of interest method?

Answer 1

ItemPURCHASE METHODPOOLING OF INTERESTS METHODBook ValueTypically higher than pooling method.Typically lower than purchase method, as no goodwill asset is created.Earnings TrendTypically lower than the pooling method because pre-acquisition income statements are not combined.Typically higher than purchase method because income statements are combined retroactively.Sales TrendTypically distorts growth perception of the acquiring company, as much of its sales growth can be attributed to the acquisition.Typically more accurate than the purchase method, as income statements are combined retroactively.Earnings Per ShareTypically lower than the pooling method.Typically higher than the purchase method, as the income statement is combined for the entire reporting period, rather than as of the acquisition date.ROA & ROETypically lower.Typically higher.