Edmund L. Jenkins
Chairman
Financial Accounting Standards Board
401 Merritt 7
P.O. Box 5116
Norwalk, Connecticut 06856-5116

Re: Exposure Draft No. 201-A

Dear Mr. Jenkins:

The Association for Financial Professionals (AFP) is writing you to urge the Financial Accounting Standards Board to maintain the option of allowing the use of pooling of interests accounting in business combinations. The ability for business combinations to be accurately presented to investors and suppliers of credit is an important tool for companies who need capital to grow. For many companies in the technology, communications and financial services industries, the requirement to use purchase accounting for business combinations may cause them to report substantially lower earnings, which in our assessment would not reflect accurately the operation of their business to potential investors. Companies in these industries are some of the most dynamic and productive in our economy. We believe that imposing a requirement to use purchase accounting in business combinations would be particularly detrimental to these companies and may have the unintended impact of impeding economic growth in the United States. We urge you to reconsider the changes the Board has proposed in Exposure Draft No. 201-A, the "Proposed Statement of Financial Accounting Standards on Business Combinations and Intangible Assets."

AFP represents over 14,000 finance and treasury professionals at companies throughout the United States who are employed by over 5000 corporations and other organizations. Organizations represented by our members are drawn primarily from the Fortune 500 companies and larger middle market companies.

We recently surveyed our senior level members who have responsibilities in accounting for business combinations. Over 200 responses were received and the enclosed report summarizes our findings.

The most important findings of this survey are:

• Financial professionals strongly prefer the option of having both the pooling -of-interests and purchase accounting methods of accounting for business combinations available to them.
   
• Forty-four percent indicated that lower reported earnings due to the purchase accounting method would pose difficulties in meeting loan covenants and bond indentures.
   
• One-half of the respondents reported that use of purchase accounting would result in reporting substantially lower earnings that would be broadly misinterpreted by investors.
   
• Implementation of the FASB proposal would impact more heavily on those industries that have a higher level of intangible assets -- mainly service industries such as finance, communications, and information technology -- than on manufacturing concerns. Our survey underscored that concerns about the proposal are notably highest in the service industries.

We believe the findings of this survey are important contributions for the FASB's deliberations on accounting for business combinations. They support our view that the preservation of the option of using pooling of interests accounting in business combinations is important to the continuation of economic growth in the most dynamic sectors of our economy.

AFP agrees with and fully supports FASB's mission statement which, in part, maintains that the Board should promulgate standards only when the expected benefits exceed the perceived costs. AFP believes Board members should consider the potential negative economic impact (i.e. reduced merger activity) when assessing whether the proposed standard is cost justified. AFP does not believe that FASB has made a clear and convincing argument that there is a significant need to eliminate a traditional and important accounting method. We welcome this opportunity to provide input.

If you have questions, please contact Frank Curran, AFP's Vice President for Government Relations and Technical Services, at 301.961.8837.

Sincerely,

cc:
Members of the Financial Accounting Standards Board
Arthur Levitt, Chairman, U.S. Securities and Exchange Commission
Commissioners of the U.S. Securities and Exchange Commission