Accounting Methods: Pooling of Interest

Project description
Accounting Methods: Pooling of Interest

In the summer of 1999, Navigant consulting had a share price of $54 per share and was voted one of the best companies. Within 90 days the stock price had collapsed and

the CEO was fired. The culprit was “pooling of interests.”

Briefly explain the situation Navigant Consulting experienced with the collapse of its stock price as a result of “pooling of interests” accounting method.

What is pooling of interests?

Why and how does this differ from GAAP Accounting?

How might this be fraudulent?

What impact does this have on earnings and quality of earnings?

Why was this only abusive in the acquisition of private companies?

Why and how did this impact the subsequent decision to outlaw the practice for any NYSE publically listed company?

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