When the US Financial Accounting Standards Board (FASB) on June 30 eliminated the "pooling" method of accounting for business combinations, the usually staid world of accounting rules saw the curtain fall on one of its most vociferous and political dramas in recent memory. In taking aim at pooling, which had been one of two accepted ways to account for combining businesses, FASB sought to bring greater clarity and consistency to accounting rules. But its effort drew the ire of corporate executives and venture capitalists, some of whom went so far as to invoke the national interest to preserve an accounting method they considered a dynamo of M&A activity and economic prosperity. Even members of the US Congress jumped into the fray over the otherwise arcane accounting topic.

True, the new rules, which dispatch pooling in favor of the alternative "purchase" method of accounting, represent a compromise. But we believe it is a step forward, particularly for those companies that prepare themselves for the post-pooling world.

Pooling's supporters liked the method because using it for M&A transactions could result in higher reported earnings and, they argued, greater value creation than would be possible using purchase accounting. The debate centered on "goodwill,"...