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compared to accounting principles currently in use the pooling method bettercare use 605274

BetterCare Hospitals, Inc. operates a chain of hospitals throughout the United States. The company has been expanding by acquiring local hospitals. Its largest acquisition, that of Statewide Medical, was made under the pooling of interests method. BetterCare complies with U.S. GAAP.

BetterCare is currently forming a 50/50 joint venture with Supreme Healthcare, under which the companies will share control of several hospitals. Supreme Healthcare complies with IFRS and will comply with the preferred accounting methods for joint ventures.

Erik Ohalin is an equity analyst who covers both companies. He has estimated the joint venture’s financial information for 2009 in order to prepare his estimates of each company’s earnings and financial performance. This information is presented in Exhibit 15-12.

EXHIBIT 15-12 Selected Financial Statement Forecasts for Joint Venture ($ millions)

Year ending 31 December




operating income


Net income


Total assets


Shareholders” equity


BetterCare recently announced it had formed a qualifying special purpose entity through which it can sell up to $100 million of its accounts receivable at any given time. Ohalin wants to estimate the impact this will have on BetterCare’s consolidated financial statements.

Compared to accounting principles currently in use, the pooling method BetterCare used for its Statewide Medical acquisition has most likely caused its reported

a. revenue to be higher.

b. total equity to be lower.

c. total assets to be higher.

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