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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 227.35

+0.3%

Dec 19 9:30 AM EST

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To: Mark Fowler who wrote (137547)	1/22/2002 11:18:45 PM
From: Oeconomicus	Read Replies (1) of 164684

Mark, perchase [sic] accounting is (actually, was, but I'll get to that) required for any merger that does not qualify for pooling. Most don't (didn't), except in banking where they work extra hard to make sure they do. Still, you missed my point. Rather than making it easier to use pooling to avoid balance sheet distorting goodwill and subsequent income statement distorting "impairment" charges, the clarity-minded <g> accounting rule-makers decided to do away with pooling altogether. Tell me, if company A has $1 million in assets and $1 million in book equity, and it buys an identical company B for stock, don't you then have a company with $2 million in assets and $2 million in equity? Not to the accountants. Let's say A has a market cap of $10 million and it issues $5 million of A stock to buy B. What do you have? Answer: A company with $6 million of assets and $6 million of equity. Where did the extra $4 million of assets and equity come from? Answer: An accountant's imagination. That's purchase accounting. Pooling would have given you a $2 million asset & equity answer. Bob

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