The Pooling of Interests Method :

The Pooling of Interests Method is for an amalgamation in the nature of merger. Following are the three salient features of this method:

• Under the Pooling of Interests Method, the assets, liabilities and reserves of the transferor company are recorded by the transferee company at their existing carrying amounts and in the same form as at the date of amalgamation.

For example, the machinery of the transferor company should be clubbed with the machinery of the transferee company and shown at a combined figure. Similarly, general reserve of the transferor company should be clubbed with the general reserve of the transferee company. This reflects the facts that the entries are simply merged together.

• If, at the time of the amalgamation, the transferor and the transferee companies have conflicting accounting policies, a uniform set of accounting policies is adopted following the amalgamation. The effects on the financial statements of any changes in accounting policies are reported in accordance with Accounting Standard (AS) 5, Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

• The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company should be adjusted in the reserves of the transferee company. Accordingly no goodwill or capital reserve will arise out of amalgamation by way of merger.