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Essay / Research Paper Abstract
This paper examines the FASB's ruling on SFAS 141, involving eliminating the pooling of "collective businesses." The paper contends that while the regulation was created for the best of reasons, it is currently creating more problems than it is solving. Bibliography lists 8 sources.
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6 pages (~225 words per page)
File: D0_MTsfas14.rtf
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Like many statements and standards, the root of these two standards has come entirely out of the effort of the FASB to encourage corporations to be more honest about what
they are buying and the fair value of their assets, so that investors dont lose money because of misunderstanding. Although these statements were issued prior to the Enron debacle of
late 2001, its likely that the SFAS 141 could have perhaps helped avert some of the problems that occurred. However, while the
best intentions are linked with SFAS 141, the statement is causing problems for a variety of companies - not the least of them is change of methods in such a
short amount of time. This paper will note some of the other challenges that experts have found in using the SFAS 141. An overview of 141
The Financial Accounting Standards Board (FASB) enacted the "business combinations" statement - along with the "Goodwill and Other Intangible Statements" during the middle of 2001 (Davidson,
2002). In a nutshell, what SFAS 141 says is that mergers and acquisitions, also known as "business combinations" should be treated as one purchase in order to eliminate pooling of
interests accounting (Davidson, 2002). Accounting for business combinations needs to be limited solely to purchase method and required goodwill (Bukics and Champan, 2002). In the meantime, all forms of intangibles
need to be tested for impairment rather than amortized (Bukics and Champan, 2002). As the business combination accounting rules went into effect June 30, 2001, calendar-year reporting companies were stopped
from amortizing goodwill from prior transactions, beginning in 2002 (Davidson, 2002; see also DeMark, 2002). It was believed by members of the FASB board, that using the purchase method to
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