Speaking at the annual Meet the Experts accounting standards conference in London recently, FASB international director Jim Leisenring said that a new business combinations accounting standard would be released by the second quarter of next year. He added that pooling will become illegal in January 2001.

During the last 12 months FASB has faced mounting opposition from sections of the U.S. business community over its proposal to eliminate pooling. Opposition culminated in the autumn when Sen. Spencer Abraham and 12 other senators wrote to express "reservations about FASB's apparent plan to move ahead with its proposal for eliminating the pooling-of-interest method of accounting."

In October, FASB decided to concentrate on accounting for goodwill amortization instead of reaching a decision on merger accounting. But Leisenring maintains that FASB's decision was not a response to pressure from the senate. He explains that goodwill was central to the issue of merger accounting, and had to be dealt with before the board could resolve business combinations.

He added that while FASB reviews opinions expressed by the Senate on behalf of the U.S. business community, senators are not in a position to force the standard setter's decision: "The only way the senate can bring pressure to bear on the FASB is to ask the U.S. Securities and Exchange Commission to overrule us. The SEC doesn't want our problems - they don't want to set a precedent for setting accounting standards."

FASB's current business combinations standard allows a choice of two methods of merger accounting -- the pooling method for mergers of equals, and the purchase, or acquisition method. FASB says true mergers of equals never occur, and that business combinations always involve one company purchasing another.

The senators said that the elimination of pooling would damage the U.S. economy by making mergers between hi-tech companies prohibitively expensive. High-tech companies have large amounts of goodwill on their balance sheets. Acquisition accounting requires companies to write off goodwill as a charge against earnings over a fixed period.

Leisenring said the Senator's argument masks the real issue: "Companies want to use pooling to avoid goodwill -- it's not that they can't afford the merger, they just don't want to amortize assets . . . pooling is an invitation to gamesmanship and mischief."

FASB expects some resistance to continue, but Leisenring remains defiant: "Abraham lost his seat when the new senate was elected, so the opposing groups no longer have a ring leader."

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