Blackstone's controversial accounting nonchange

The Blackstone Group had planned to adopt a new fair value accounting standard, one that would have changed the way it accounted for the carry on certain investments. Basically, the new technique would allow it to book the carry as profit as soon as an investment is made. Breakingviews.com notes that a footnote in the prospectus said the amount of "carry dollars created" is calculated by multiplying investments of limited partners by 20 percent. The change would have made the group's numbers look really good. But apparently, according to the Financial Times, its investment bankers balked, and the firm has decided not to go forward with the new method, which many other firms are considering. So what effect will this have? Breakingviews.com says that Blackstone's original prospectus said it would have $2.3 billion in earnings. The nonchange pushes that down to a loss of $281 million. You have to wonder what effect this will have on the IPO.

For more:
- here's the Breakingviews.com article
- here's the Financial Times article