The Financial Accounting Standards Board voted Wednesday to eliminate pooling of interests, an accounting method that has fueled the merger boom in the banking industry.

In a half-hour meeting in Norwalk, Conn., the seven-member board voted unanimously that purchase accounting should be the only method available to companies planning to acquire other companies.

The board plans to issue a final standard for merger accounting in late 2000.

It is taking comments on the formal proposal through the third quarter, but merger experts say opponents of the proposal face an uphill battle.

"FASB has been determined to do this," said H. Rodgin Cohen, a partner at Sullivan & Cromwell. "It is unlikely that they will change their decision unless there is extraordinary pressure by the banks and the rest of corporate America."

In pooling of interests the assets of the two merging companies are combined, and financial results are reported as if the buyer and seller had previously been one company. The values of each company's assets are not repriced.

In purchase accounting the price paid above the acquired company's net worth is accounted for as goodwill, an intangible asset that must be amortized-or subtracted from the combined company's reported earnings-over as long as 40 years. Banks have eschewed purchase accounting because goodwill hurts earnings.

The change will affect companies that initiate deals after the final standard is issued, which prompts some to predict a flurry of deals as companies try to beat the deadline.

"It's time for banks to look for a partner and start doing the Texas two-step," said Gerard Cassidy, a bank analyst at Tucker Anthony. "And it will have to be fast. If banks try to merge too close to the deadline, the Securities and Exchange Commission will turn over all the rocks to prevent them from doing a pooling deal."

Some are concerned the decision will ultimately harm merger activity in the industry.

Citigroup, Chase Manhattan Corp., Bank One Corp., and other big banks wrote letters protesting the plan.

The accounting change would put U.S. banks at a disadvantage to foreign companies, which are allowed to write off the goodwill, said Mr. Cohen of Sullivan & Cromwell.

"Banks will eventually adjust to this. But the question is, how long will it take? Six months, one year, two years? That will be a critical period for consolidation, and it is not an insignificant problem."

Executives at some smaller banks, such as Centura Banks Inc. in Rocky Mount, N.C., are pleased by the FASB's decision.

"The elimination of poolings is good for banks and banking because it levels the playing field." said Steven J. Goldstein, chief financial officer at Centura.

"During the merger wars, we lost out because we used a cash earnings measure while other companies used GAAP, which artificially inflates earnings. With the end of poolings, now everybody has to use the same yardstick."

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