Purchase Acquisition

DEFINITION of 'Purchase Acquisition'

An accounting method used in mergers and acquisitions with which the purchasing company treats the target firm as an investment, adding the target's assets to its own fair market value.

BREAKING DOWN 'Purchase Acquisition'

If the amount paid for a company is greater than fair market value, the difference is reflected as goodwill. Because goodwill must be written-off against future earnings, this makes the pooling-of-interests method preferable.

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