The Treasury Stock Method and Conventional Method in Reciprocal Stockholdings - An Amalgamation: A Reply.

Abstract This article presents the authors' comments on the criticism of their article by professor Raymond S. Chen related to treasury stock method and conventional method in reciprocal stockholding, which was published in an earlier issue of the journal "The Accounting Review," as of April 1975. The authors say that the confusion begins with Chen's criticism against the alternative simultaneous equations methods. These alternative simultaneous equations methods were not the focus of the authors' article published in an earlier issue of the journal, but were a means that they utilized to introduce the liquidation approach to report reciprocal holdings. In the authors' opinion, Chen properly declared that the authors demonstrated that the traditional treasury stock method in reciprocal stockholding situations misstates the minority interest and is not consistent with a true treasury stock approach. But if this is true, it is difficult to understand why Chen again attempts to prove the validity of this point to the reader when he presents support for such an approach. Chen appears to challenge the modified treasury stock method.