WASHINGTON - A government proposal to eliminate a popular method of merger accounting has drawn strong criticism from banks but may be unstoppable.

About a dozen banks and industry groups wrote the Financial Accounting Standards Board regarding its September proposal to do away with pooling-of-interest accounting. The plan would force merging companies to use purchase accounting, a method employed today in fewer than half of all bank deals. A final rule could take effect by yearend 2000.

Under a 1970 rule, financial institutions pursuing a merger of equals must use the pooling method, provided they satisfy a list of 12 requirements. Companies seeking to acquire another company outright must use the purchase method. But the FASB says banks are manipulating the rule in order to avoid using the purchase method, which requires them to amortize goodwill at the expense of earnings.

"True mergers of equals are so rare," said Kimberley R. Petrone, a project manager at the quasi-governmental group. "If I've seen one in my lifetime, that's a lot."

The FASB says purchase accounting - which, unlike pooling, assigns a fair value to all assets and liabilities - gives investors and other users of financial statements a clearer picture of a bank's true worth. "When two different accounting methods are used for what is essentially and economically the same transaction, it is confusing to investors," FASB Chairman Edmund L. Jenkins said in September.

Most bank letter-writers opposed the standards board's plan. The Independent Community Bankers of America argued that, "right or wrong," buyers, sellers, investors, and analysts often view purchase transactions less favorably than pooling ones. "We believe that this accounting change, should it go forward, would decrease the franchise value of financial institutions," wrote ICBA president Robert N. Barsness.

Donna A. Fisher, director of tax and accounting at the American Bankers Association, said the FASB plan could "severely" and unfairly depress banks' reported earnings per share. She argued that if the standards board thinks banks are abusing the pooling method, it should tighten the requirements for using pooling, not kill the option altogether.

William J. Roberts, senior vice president and controller at Bank One Corp., said, "The pooling method should not be eliminated simply to achieve convergence with international accounting standards or to reduce SEC staff workload." Bank One used pooling for its merger with First Chicago NBD Corp.

Despite their zeal, several letter-writers said they were pessimistic about their chances of dissuading the FASB, which has been edging toward purchase accounting for years. "I think it's a done deal," Ms. Fisher said. "Why do you think so few banks wrote in?" Meanwhile, Ms. Petrone of the standards board said it was impossible to predict how the board would act. "We really haven't heard anything new in the comment letters that we haven't heard before," she said, however. The board is to hold public hearings in February.

Not all financial industry letter-writers opposed the standards board's proposal. Robert R. Davis, director of government relations at America's Community Bankers, said it was ridiculous that companies such as Bank One, Bank of America Corp., and Citigroup Inc. were able to use pooling in their recent megamergers. "If you look at every acquisition, there's a dominant company," he said. Mr. Davis proposed that an exception should be made for mergers between mutual thrifts, which do not involve stock or cash transfers. About half of all thrifts are mutually owned.

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