Pooling Of Interests

What is 'Pooling Of Interests'

Pooling of interests is a method of accounting that allows the balance sheets of two companies to be added together during an acquisition or merger. Pooling of interests is one of the accounting methods that companies can choose to employ when combining assets. The alternative would be the purchase method in which the purchasing company adds the absorbed company's assets to its fair market value.

BREAKING DOWN 'Pooling Of Interests'

One of the important differences between the two methods is that pooling of interests allows for assets to be evaluated by book value rather than market value. This allows them the option to work without adding in goodwill, an intangible value that a business earns through reputational factors like customer relationships and brand recognition.