Abstract
This study analyzes the evolution of the Financial Accounting Standards Board (FASB)'s Statement of Financial Accounting Standards (SFAS) 141 and 142, through a detailed analysis of comment letters submitted to the FASB on Business Combinations Exposure Drafts 201 and 201 (Revised). Comment letters, an integral part of the standard-setting process, contain valuable insights on the views of parties affected by FASB's pronouncements – issuers, professional accountants and auditors, securities analysts, and others. The content analysis indicates that a majority of corporate respondents opposed the abolition of the pooling-of-interests method, not on theoretical grounds, but on the grounds that abolishing pooling would bring adverse economic consequences to their firms and industries. Letters also show strong differences in views across various groups of respondents. On the question of how goodwill should be treated once recognized, the amortization-with-impairment approach garnered significantly more support from the entire pool of respondents than the impairment-only approach, and the dominant view among most respondents, particularly audit firms, was that an impairment-only approach would not be reliable enough to be feasible in practice. These views are in sharp contrast to the FASB's eventual adoption of the impairment-only approach in SFAS 142, Goodwill and Other Intangible Assets, which suggests that the evolution of this standard was subject to forces not fully evident from, or reflected in, the comment letter process.