SAN FRANCISCO - Wells Fargo & Co. said changes to the accounting standards for mergers and acquisitions will increase its net income next year by $560 million.

In its 10-Q quarterly filing with the Securities and Exchange Commission, the company said that the elimination of goodwill amortization is also expected to reduce its pretax noninterest expenses by about $600 million.

The Financial Accounting Standards Board has banned the pooling-of-interests method of merger accounting, which allowed companies to combine their assets without affecting their earnings.

The new standard - which is optional for now but will be mandatory for fiscal years that will begin after Dec. 15 - requires companies to account for goodwill, the difference between a company's purchase price and the market value of its tangible assets.

Wells plans to complete a goodwill impairment test to see if it will need to take a "transition impairment charge" under the new standard, the filing said.

Also in the filing, Wells Fargo echoed the concerns of other California banking companies about possible repercussions of the state's energy crisis.

Continued energy shortages "could disrupt our business and the businesses of our customers who have operations or facilities" in California and other western states, Wells said in the filing.

In early June a spokesman for the company told American Banker that "we don't feel the California economy is a significant enough factor to address specifically."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.