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A member of the International Accounting Standards Board, James Leisenring, told attendees at the Standard & Poor’s Accounting Hot Topics conference in New York on December 10, 2009, about possible abuses and accounting arbitrage that may result from IASB’s recently issued standard for recognizing and measuring financial instruments. In his remarks, he acknowledged that political pressures had forced the board to publish the standard. In his remarks, Leisenring presented serious reservations about company adoptions of the new standard, IFRS 9, which is the first of a three-part effort to replace the IAS 39 standard on financial instruments. (For an EU perspective, refer to the article by Peter Williams.)

QUESTIONS:

1. Who are the political powers that Leisenring contends were pressuring the IASB? Do you think this happens with FASB processes? Explain.

2. Look at the article by Carver (in particular, the sixth & seventh paragraphs). Leisenring is critical of the “look-through” method of accounting for products like collateralized debt obligations. What are collateralized debt obligations and tranches?

3. Where do collateralized debt obligations appear on the financial statements under U.S. GAAP?

Sources:

Carver, Laurie (2010). “Abuse of Revised IFRS Standards “Inevitable” – IASB’s Leisenring,” Risk.net. (Retrievable online at http://www.risk.net/life-and-pensions/news/1567708/abuse-revised-ifrs-standards-inevitable-iasb-s-leisenring)

Cohn, M. (2009). “IASB’s Leisenring: Pay No Attention to IFRS 9,” WebCPA (Retrievable online at http://www.webcpa.com/news/IASB-Leisenring-Pay-No-Attention-IFRS-9-52702-1.html)

Williams, Peter. (2009). “Accounting: IFRS 9 and What It Means For Year-End Reporting,” Computeractive (Retrievable online at http://www.computeractive.co.uk/financial-director/comment/2255297/shock-value)

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