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To: Mark Fowler who wrote (137547)	1/22/2002 9:36:01 PM
From: Glenn D. Rudolph	Respond to of 164684

"Assuming that Mr. Silbert is correct, Mr. Lay joins a short list of chief executives whose pay in the 1990's was astronomical, and who ended up with severe financial problems because they borrowed too heavily against assets whose high value proved to be temporary. The others known to have such problems are Bernard J. Ebbers, the chief executive of WorldCom (news/quote), whose margin loans were guaranteed by the company and whose shares are now worth less than he owes, and Steven Hilbert, the former chief executive of Conseco (news/quote), who bought Conseco shares with money borrowed from the company before the stock price collapsed and he was fired." nytimes.com

To: Mark Fowler who wrote (137547)	1/22/2002 11:18:45 PM
From: Oeconomicus	Read Replies (1) \| Respond to 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