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Accounting for Business Combinations: A Comparative Analysis of IASB, FASB, and Chinese Financial Reporting Standards
C. Richard Baker, Adelphi University
Yuri Biondi,
Qiusheng Zhang,
ABSTRACT. This paper examines the decision of the accounting standards setting body of the Peoples’ Republic of China (PRC) to permit the pooling of interests method of accounting for business combinations when the combining entities are considered to be under "common control". The paper presents a comparative analysis of the IASB, FASB and Chinese standards for business combinations. Based on this comparative analysis, the pooling of interest method emerges as a key point of distinction. While both the IASB and the FASB have prohibited the use of pooling, the Chinese standard setters have specifically allowed its use. To help explain the reasons for this decision, the paper reviews the theoretical reasons behind the pooling method. This analysis provides some insight into the decision taken by the Chinese standard-setters.
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