Purchase vs. the acquisition method

CFA Level II
#1

Hello,

I know the pooling of interest method involves combined the different line items on the balance sheet at book value.

However, pooling of interest method (associated with GAAP) and uniting of interest method (associated with IFRS) were both replaced in 2001 and 2004 due to potential earnings manipulation from using this accounting method to deflate the value of depreciation expense. GAAP and IFRS then decided to employ the purhcase method (which combined the assets and liabilities of the two companies at fair market value, so depreciation would not be deflated like it could be under the pooling/uniting of interest method.

My question is if the purchase method is different than the acquisition method (where the B/S and I/S of two companies are combined and and adjusted in the B/S for goodwill in the S/E section of the B/S of the acquirer company)?

Thanks,

#2

Purchase and acquisition are the same thing; they’re distinguished from the equity method.