James Leisenring, a member of the International Accounting Standards Board, told attendees at an accounting conference in New York to disregard the board’s recently issued standard for recognizing and measuring financial instruments, acknowledging that political pressures had forced the board to publish the standard.

The new standard, IFRS 9, is the first of a three-part effort to replace the IAS 39 standard on financial instruments, which the European Commission and several European governments had pressed the IASB to revise after blaming fair value measurement for exacerbating the effects of the economic crisis.

“They said they wanted it done now, but they wanted it suspended,” said Leisenring, who is the IASB’s liaison to the U.S. Financial Accounting Standards Board. However, he noted that the mandatory adoption date is five years away, and he emphasized that the standard is subject to change as FASB works to revise its own fair value standards for financial instruments.

“We hope you’re smart enough not to adopt it,” warned Leisenring, noting that it was unusual for a standard-setter to tell accountants not to adopt a standard.

An IASB spokesman disavowed the comments, saying, “The IASB voted 13-2 in favor of IFRS 9. Jim was one of the dissenters. His comments on these issues are his own and do not represent the views of the board as a whole. The G20 asked that we complete this work by year-end, and we have done so.”

Speaking at Standard & Poor’s Accounting Hot Topics conference, Leisenring also pointed out that companies need to do a better job with their disclosures, noting that they are often scattered all over financial reports, particularly with regard to disclosures of derivatives. “They don’t put them all in one place,” he said. “They put them in a lot of places because the lawyers tell them they have to do it, to avoid liability.”

Matthew Schroeder, managing director and head of accounting policy at Goldman Sachs, argued that it was that way for a reason. “To try to distill all those derivatives into one footnote doesn’t do them justice,” he said. However, like Leisenring, he also decried the politicization of accounting standards. “We had been bullish on convergence,” he said. “We’re tempering that, seeing the political influence in the past year.” He noted that Goldman is providing input to the IASB in London, particularly on consolidation standards and fair value standards. “Things have clearly troubled us in what the IASB proposed, but they’re starting to come the other way,” he said.

Speaking on a later panel, another IASB member, Patrick Finnegan, backed Leisenring’s comments. “I consider Jim Leisenring a colleague and a friend, and I wish he had expressed those views 10 or 15 or 20 years ago when it was a different environment,” he said. “But let’s not waste a good crisis.”

He too criticized political interference with accounting standards. “The politicization of accounting standards has undermined confidence in the markets and affected even the way Goldman Sachs is dealing with convergence,” said Finnegan. He is encouraging IASB Chairman Sir David Tweedie and the IASB staff to develop a cohesive framework to present information such as derivatives disclosures.

The panelists also discussed the issuance of recent FASB standards, such as FAS 166 and 167, to move off-balance-sheet special-purpose entities back onto the balance sheet, and how that is affecting the convergence process. “The issuance of those pronouncements does move us closer,” said SEC deputy chief accountant Julie Erhardt.

Another regulator, Arthur Lindo, associate director and chief accountant of the Federal Reserve System, said the Fed needs more information across sectors to properly assess risk. "We in the regulatory community do have access to considerably more information than investors," he said. "Even though we have access to more information, we don't have access to information on risks across sectors. It takes us time to pull all this together." He noted that having that type of information would have provided information earlier on AIG's relationships with its counterparties.

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