Definitions for "Purchase method"
a merger accounting treatment whereby a buyer purchases the assets (and liability obligations) of a company at their market price and then records the difference between the purchase price and the book value of the assets as goodwill. This goodwill need not be amortized but must be valued annually and any decreases or increases in value must be reflected in the buyer's financial statements.
Accounting for an acquisition using market value for the consolidation of the two entities' net assets on the balance sheet. Generally, depreciation/amortization will increase for this method (due to the creation of goodwill) compared to the pooling method resulting in lower net income.
Requires that the buyer must be identified, and therefore goodwill created, in accounting for mergers and acquisitions.... more on: Purchase method