Sir David Tweedie, chairman of the International Accounting Standards Board, considered resigning last month after coming under intense pressure from European Commission officials to retreat on fair-value accounting rules.

The Commission wanted IASB to ease its rules relating to the valuation of financial instruments, to help banks weather the financial crisis. The Board did make major changes—sparking sharp criticism from some circles—but the Commission is still pushing for more action.

Tweedie told a recent hearing of a U.K. parliamentary committee that the Commission’s demand for a change to fair-value rules “came out of nowhere” along with “a blunt threat to blow the organization away” if IASB didn’t comply.

Faced with that threat, the Board suspended its due process rules and rushed through changes to International Accounting Standard No. 39, Financial Instruments: Recognition and Measurement, and International Financial Reporting Standard No. 7, Financial Instruments: Disclosures. The move allowed banks to avoid write-downs on some assets by reclassifying them to be exempt from fair-value measurement rules.

Tweedie told Parliament that if IASB had not acted, the Commission would have made wider ranging—and unilateral—changes to IFRS as applied by European companies. If the Commission had gone ahead with those changes, European accounting would have been “totally out of control,” Tweedie said.

Facing questions about whether he had been “spineless” for giving in to the pressure, Tweedie conceded that the incident had undermined the independent status of IASB and that he had considered resigning. He decided to stay because “I wanted to win this one,” he told the committee.

The European Commission has made it clear it wants IASB to make more changes to its fair-value rules. In a letter to Tweedie, the Commission’s director general for the internal market and services, Jorgen Holmquist, described the reclassification move as “only the first step in an ongoing process to comprehensively address accounting issues raised in the context of the financial turmoil.”

The letter called for action in four areas: more guidance on the application of fair values in an illiquid market, scope for further asset reclassifications, clarification on the treatment of derivatives included in collateralized debt obligations, and changes to the impairment rules applicable to available-for-sale financial assets. It wants IASB to act by December, so that banks can use revised accounting rules in their year-end financial statements.

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