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Distortions Arising from Pooling-of-Interests Accounting

Abraham J. Briloff
Financial Analysts Journal
Vol. 24, No. 2 (Mar. - Apr., 1968), pp. 71-80
Published by: CFA Institute
Stable URL: http://www.jstor.org/stable/4470312
Page Count: 10
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Distortions Arising from Pooling-of-Interests Accounting
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Abstract

In his address, which is reported in full, Professor A. J. Briloff shows how the financial statements of Litton, Gulf & Western (as illustrations) reflect distorted earnings and growth patterns--distortions made possible by the confusion, uncertainty, and flexibility presently permitted by pooling. Professor Briloff urges the abandonment of pooling accounting excepting in the case of major combinations; but going beyond that he urges that the independent auditor become really independent and to act as the "ombudsman" or "surrogate" in our corporate society. He closes on an ominous note, prophesying that a "super-Westec" is brewing somewhere, and that, if the financial community fails to persist aggressively in developing better standards of fair corporate accountability, they should not point an accusing finger at the accounting profession; this is because they (the financial community) "are not merely an innocent bystander but are, in fact, an accessory before the fact, and possible also an accomplice."

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