Purchase method

Definition:

Accounting for an acquisition using market value for the consolidation of the two entities' net assets on the balance sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the pooling method resulting in lower net income.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Trade credit

Credit one firm grants to another firm for the purchase of goods or services. That is, when the goods are delivered, the recipient does not have to pay immediately for the goods - a credit is given... Read More

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