Article: The Impact of Purchase and Pooling Methods on Financial Analysts' Forecasts and Price Informativeness Journal: Journal of Business and Management (JBM) 2000 Vol.7 No.2 pp.7 - 29 Abstract: The FASB issued an Exposure Draft in 1999, requiring all business combinations to be accounted for using the purchase method. The proposed rule eliminates use of the pooling method and creates opportunity for achieving convergence on how business combinations are accounted for internationally. The Exposure Draft requires that goodwill expense be presented after income from continuing operation on a net-of-tax basis as a separate line item on the income statement. These changes are expected to reduce the 'information loss' reported for the purchase method and improve global financial statement comparability. These changes are generally consistent with the policy implications of our results, which show that the 'information loss,' measured by analysts' forecast accuracy; analysts' convergence of beliefs, and stock price variability, from the existing purchase method adjustments is quite substantial. Inderscience Publishers - linking academia, business and industry through research

Title: The Impact of Purchase and Pooling Methods on Financial Analysts' Forecasts and Price Informativeness

Authors: Sung S. Kwon; Gordian A. Ndubizu; Kathleen Dunne

Addresses: Author address listing can be found in the "About the Authors" section at the end of the article.

Abstract: The FASB issued an Exposure Draft in 1999, requiring all business combinations to be accounted for using the purchase method. The proposed rule eliminates use of the pooling method and creates opportunity for achieving convergence on how business combinations are accounted for internationally. The Exposure Draft requires that goodwill expense be presented after income from continuing operation on a net-of-tax basis as a separate line item on the income statement. These changes are expected to reduce the 'information loss' reported for the purchase method and improve global financial statement comparability. These changes are generally consistent with the policy implications of our results, which show that the 'information loss,' measured by analysts' forecast accuracy; analysts' convergence of beliefs, and stock price variability, from the existing purchase method adjustments is quite substantial.

Keywords: Exposure draft; pooling method; information loss; forecast accuracy; convergence of beliefs; stock price variability.

DOI: 10.1504/JBM.2000.141065

Journal of Business and Management, 2000 Vol.7 No.2, pp.7 - 29

Published online: 05 Sep 2024 *

Title: The Impact of Purchase and Pooling Methods on Financial Analysts' Forecasts and Price Informativeness

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