FASB chairman Edmund L. Jenkins.

The move means that following the release of a final statement, which is expected in late June, all business combinations would be accounted for under the purchase method, a plan that has drawn backlash from the business community.

But in an effort to make the change more palatable to corporate executives, who argue that the move would put a damper on mergers, the board in December proposed two changes to the purchase method under which all goodwill would be accounted for using an impairment approach. One such proposal would apply to acquisitions made after the final statement is issued, while the other would apply to acquisitions made before the board issues its final statement.

Under the impairment approach, goodwill wouldn't be amortized against earnings. Instead, it would be reviewed for impairment, that is, written down and expensed against earnings only in periods in which the recorded value of goodwill is more than its fair value. An Exposure Draft for public comment on the accounting for goodwill is expected in mid-February.

According to FASB chairman Edmund L. Jenkins, "The purchase method, as modified by the Board during re-deliberations, reflects the underlying economics of business combinations by requiring that the current values of the assets and liabilities exchanged be reported to investors."

"Without the information that the purchase method provides, investors are left in the dark as to the real cost of one company buying another and, as a result, are unable to track future returns on the investment," Jenkins added.

Separately, the Financial Accounting Foundation's Board of Trustees, which oversees the activities of the FASB, announced the appointment of two board new members. Katherine Schipper, the L. Palmer Fox professor of business administration at Duke University's Fuqua School of Business, and John K. Wulff, chief financial officer of Union Carbide Corp., have each been named to five-year terms as members of the FASB.

Schipper, who will take her post Sept. 1, succeeds outgoing FASB member Gerhard G. Mueller, a former professor at the University of Washington. Wulff, who takes his seat on the board on July 1, succeeds Gaylen Larson, former group vice president and chief accounting officer of Household International Inc.

-- SmartPros News Staff

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