As though we needed more reasons to avoid the looming IPO of The Blackstone Group, The Wall Street Journal reported today [subscription] that "Blackstone Group's planned initial public offering of shares is shaping up as a test case of controversial new accounting rules that could allow the buyout giant to book profits upfront on deals whose value could take years to realize . . . At issue are rules adopted by accounting rule makers in February. They allow companies to book income from their investments immediately -- using estimates of what management determines to be their "market," or fair value . . . Because most of Blackstone's investments are in private companies, they are difficult to value. Some critics say Blackstone's accounting treatment could give its management too much leeway in valuing investments, allowing it to provide overly rosy earnings."

Needless to say, this will draw inevitable comparisons to Enron's mark-to-market accounting scheme. The Wall Street Journal already made the connection. Basically, Blackstone executives will be able to make a guess about how much they will generate from a recent acquisition when they sell it at some point in the future -- and book the profit immediately. Here's the problem: management will have an opportunity to basically decide how much in earnings it wants to report to shareholders, while the insiders are cashing out.

The Blackstone Group's IPO looks like a bad bet, and I won't be going anywhere near it, as much as I admire the firm's accomplishments.