[Comments on Allowability of Costs Incident to Mergers and Other Business Combinations]

GAO commented on the allowability of costs incident to mergers or other business combinations. It was determined that: (1) the two methods of accounting for capital asset costs following a merger or other business combination were the purchase method and the pooling-of-interests method; (2) under the purchase method, one business acquires another business at its cost; (3) under the pooling method, two businesses exchange equity securities and carry forward the costs of assets to the combined corporation; (4) the government should limit the book value of an asset to its value when first devoted to government contracting, less accumulated depreciation; and (5) the government should not revalue assets on a case-by-case basis unless a business combination would result in increased benefits to the government.