Research On Accounting Method Applicability Of Business Merger Under Common Control

The choice of business merger accounting methods has been a controversial topic all along internationally. Ultimately the pooling of interest method was canceledin International Accounting Standards and many other countries’ Accounting Standards. It means that pooling method withdrew from the stage of history. However, in our Accounting Standards, business merger under common control should use the pooling method and business not under common control should use the purchasing method. The applicability of the pooling method comes to be a controversial topic in our accounting field. The management may use the characteristic of the pooling method to do earnings management. However, our business merger under common control has certain features. So how does the pooling method bring earnings management problems? Different accounting methods will provide different accounting information, and then affect the investment decision. So what about the quality of accounting information of the pooling method?The paper used both normative and empirical methods to analysis the applicability of the pooling of interest method in our country’s market environment. From exploring the economic essence of business merger under common control, then the research analyzed the earnings management problem of the pooling method. From the perspective of decision usefulness of the accounting information, the research used a model based on Ohlson price-model to test the value relevance of accounting information provided by the pooling method. Finally the research got a conclusion:the using of the pooling method is consistent with economic essence and has value relevance. The pooling method is applicable in the current market environment of China. The innovation of this paper is using both theoretical and statistical analysis results to analyze this topic. This paper analyzed the applicability of the pooling method from the earnings management problem and the value relevance two perspectives, providing a new perspective and data support for this research field.