the constituent entities are of such relatively the same size that the acquiring and ac-
quired entities cannot be distinguished from each other. In the United Kingdom, Ger-
many, Sweden, Italy, Belgium, Singapore, and Korea, and under European Direc-
tives, pooling treatment is available for business combination in which shares of
stock are exchanged to effect the transaction regardless of the relative sizes of the
combining entities.
In all jurisdictions, purchase accounting is permitted but with varying ways of
computing and accounting for goodwill. In Australia, Belgium, Canada, Hong Kong,
Germany, Israel, Korea, Mexico, Singapore, and South Africa, goodwill is calculated
as the excess of purchase price over the fair value of identifiable net assets. In Japan,
goodwill represents the residual amount after the excess of the purchase price over
the aggregate book value of net assets acquired has been allocated primarily to tan-
gible fixed assets. Thus, not all assets and liabilities will be stated at their individual
fair value after the acquisition has taken place. The EDs do not explicitly address the
manner in which goodwill would be allocated.
18 • 20 CONSOLIDATED FINANCIAL STATEMENTS AND BUSINESS COMBINATIONS