Some mergers and acquisitions (M&as) did not generate any goodwill because they were accounted for using the pooling-of-interests method. In 1969, Leonard M. Savoie (then Executive Vice President of the AICPA) stated that he expected the then-prevailing accounting pronouncement authority, the Accounting Principles Board (APB), to abolish the pooling of interests method. However, the death-knell for this accounting method was not sounded until 2001 with the issuance of SEAS No. 141. Thereafter, whenever the purchase price of an acquisition exceeds the fair market value of the acquired company's net assets, the assignment of cost to goodwill is mandatory. (26)

According to Hake (2004), although the presence of goodwill on a balance sheet represents an expectation of higher profit, there is a cost associated with its accumulation: "Because goodwill is currently treated as a nonregenerating asset, accounting practice requires that it be removed from the balance sheet as it depreciates. The...
[ View Full Essay]