Purchase Method vs. Pooling of Interest Method

Purchase Method vs. Pooling of Interest Method | Finance Train

The following table illustrates some of the consolidated financial statement differences between the purchase method and pooling of interest method.

Item	PURCHASE METHOD	POOLING OF INTERESTS METHOD
Book Value	Typically higher than pooling method.	Typically lower than purchase method, as no goodwill asset is created.
Earnings Trend	Typically 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 Trend	Typically 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 Share	Typically 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 & ROE	Typically lower.	Typically higher.