Some of the nation's biggest banks have weighed in against a proposed rule that would bar the use of the industry's favored method of accounting for mergers.

A few smaller ones are in favor of a rule that would eliminate the endangered pooling of interest approach.

Chase Manhattan Corp., J.P. Morgan & Co., Citigroup Inc., and Bank One Corp. have submitted letters to the Financial Accounting Standards Board, opposing its proposal to ban poolings. The proposal is due for release this summer.

"We believe the elimination of pooling and required purchase accounting with goodwill amortization will have a negative impact on U.S. corporations," said Chase executive vice president and controller Joseph L. Sclasani in a Feb. 17 letter to the board. "Numerous merger transactions which make economic sense may not occur, simply because of the adverse accounting treatment which would result."

Other opponents of the change warned that it would eliminate the merger premium that has lifted many banks' stock price.

But some smaller banks agree with the accounting board that the change is needed to make earnings reports clearer, and argue that the change would level the playing field among acquirers.

Pooling, which enables combining companies to state assets as if they are one, has facilitated the greatest merger boom in banking history. Its alternative is purchase accounting, which many companies do not use because it requires them to amortize goodwill-an intangible asset representing the price of an acquisition-which suppresses earnings.

FASB's proposal-entitled "Recommendations for Achieving Convergence on the Methods of Accounting for Business Combinations" - is widely expected to take effect as early as Jan. 1, and to be retroactive to the day it is released.

The accounting board, in conjunction with accounting organizations from Canada, the United Kingdom, Australia, and New Zealand, invited companies to comment on the elimination of poolings. So far the U.S. standards board has received 131 responses, 17 from banks.

"Eliminating pooling of interest accounting would be a particular bad idea for the banking industry," said bank analyst Peyton Green of Sterne, Agee & Leach in Birmingham, Ala., who urged clients to write their accountants and FASB on the matter.

"FASB wants to eliminate poolings in order to conform accounting standards to those of other countries, but foreign financial disclosure standards lack transparency or visibility," Mr. Green said. "And FASB wants to copy them. Say what?"

The elimination of poolings could lower acquisition multiples by 25% to 50%, Mr. Green said.

If banks are forced to use purchase accounting, they will be at a severe disadvantage to foreign companies, said H. Rodgin Cohen, an attorney with Sullivan & Cromwell in New York.

"In other countries, companies that merge use the purchase method, but they can write off the goodwill much more easily," Mr. Cohen said. In the U.S., companies that use the purchase method of accounting must write off the goodwill over 20 years.

Some opponents of poolings, however, say the method obscures banks earnings. They say purchase accounting would take the "noise" out of earnings reports and rid the industry of aggressive acquirers, who dilute earnings for the sake of size.

Some bankers are enthusiastic about the elimination of poolings of interest, said Mr. Ryan of Bear, Stearns & Co.

"If you are a rational acquirer, you lost out on potential acquisitions, because more aggressive acquirers have snagged strong franchises because of poolings of interests," Mr. Ryan said. "The elimination of poolings will make it incrementally more difficult for empire builders to do dilutive deals."

"It is a pleasant surprise that bankers are not uniformly against it," Mr. Ryan added. "Banks that are in favor of giving up poolings of interests are willing to give up an easier way to muddy their earnings and obscure the real effect of their transaction."

To oppose poolings "is a vote in favor of honesty and transparency."

Steven J. Goldstein chief financial officer of Centura Banks Inc. said that he looks forward to the end of poolings of interest.

"I don't disagree with the assessment that the elimination of poolings runs the risk of making an honest man or woman," said Steven Goldstein, chief financial officer at Centura Banks. "Poolings can hide certain operating problems which are more difficult to hide in cash earnings."

The end of the poolings will give rise to new ways to look at banks, such as cash earnings, Mr. Goldstein said.

"Cash earnings are much more difficult to manipulate," said Mr. Goldstein. "Cash earnings are much harder to attain."

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