FASB Chairman Steps Down

Yesterday, Robert Herz, Chairman of the Financial Accounting Standards Board ("FASB"), announced his resignation amidst a number of critical issues requiring resolution by the board.  It is interesting timing given that Mr. Herz had two years remaining for his term as Chairman.  It certainly adds to the uncertainty about the direction the board will take in the areas of mark-to-market accounting and the convergence of GAAP and IFRS.  Here is the Wall Street Journal's view.

Mr. Herz's departure, set for Oct. 1, also comes as the body is enmeshed in a battle over a proposal to expand the use of mark-to-market accounting, which requires companies to use market prices rather than management estimates to value financial holdings. Some investors say this practice brings a more realistic view to the numbers that public companies report, but banks have vigorously opposed the practice. They say it will introduce unnecessary volatility into results and exacerbated the financial crisis.

At the same time, Mr. Herz's departure may affect the board's ability to complete projects designed to bring together its rules and those set by the London-based International Accounting Standards Board. Mr. Herz's long-stated goal was to make both accounting regimes similar enough that U.S. public companies could abide by the international standards.

Mr. Herz may be stepping down now rather than succumb to continuing political pressure being placed on the board. We may never know if that is the case, but one thing is for certain - the new Chairman will certainly have his or her hands full when they begin their term.