Backs Out of Acquisition

from the accounting-rules dept

It was a bit of a surprise when announced they were buying SeeUThere, but now it’s more of a surprise that they’re backing out of the deal. They claim the reason they are doing so is because they can’t account for it as a “pooling of assets” (the more popular way of accounting for an acquisitiong). To me, this has always been a silly excuse. First off, if an acquisition makes sense from a business standpoint, then it really shouldn’t matter how you account for it. Second, enough studies have been done that show investors are smart enough to take into account the purchase method when looking at financial statements (so the fact that a purchase method will put a bigger hit on income shouldn’t have that big an effect). Though, I could see why there might be a few problems if the goodwill is huge (which it probably was) and is trying to reach profitability.

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