GAAP and IFRS

FASB Announces Trott’s Replacement

A FASB staff member and former KPMG partner, Lawrence W. Smith will begin his new job this summer. His appointment is the first since the SEC deman...
Sarah JohnsonApril 9, 2007

Lawrence W. Smith, a 25-year veteran of KPMG, has been appointed to the Financial Accounting Standards Board to replace outgoing member Edward Trott.

He will serve a five-year term beginning July 1. Trott is retiring after seven and a half years with the board on June 30. Smith has been a member of the FASB staff for nearly five years. He is the director of technical application and implementation activities and chairman of the Emerging Issues Task Force.

The Financial Accounting Foundation announced Smith’s appointment on the heels of controversy surrounding FASB’s independence from the Securities and Exchange Commission. As reported by CFO.com, the SEC’s Office of the Chief Accountant recently refused to sign off on FASB’s 2007 budget until FAF, its parent organization, gave the SEC more say in the appointment of FASB members and FAF trustees.

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In a March 9 memo to the SEC, the FAF agreed to a new process for the SEC to review FASB and FAF candidates. The memo stipulates that the SEC has the power to nominate and interview candidates. The SEC officially certified the FASB’s budget on March 14, a job it was given under the Sarbanes-Oxley Act when FASB’s funding source was switched from audit firms to fees from publicly-listed companies.

The SEC has denied that its new involvement in FASB’s process expands the power the regulator has over the standard-setter. The SEC has always had the statutory authority to determine which accounting rules are acceptable for use in financial reporting, and since 1973 has recognized FASB as the primary standard setting body. In a 2003 policy statement, the commission said FASB needs to act independently so that accounting standards are created “free from bias.”

In statement released Monday, FASB chairman Robert Herz said Smith will bring “tremendous value” to the board. Smith joined FASB in 2002. He had served as a partner in KPMG’s Department of Professional Practice, engagement partner, and SEC reviewing partner for several international Fortune 1000 clients. He also worked on a technical standards subcommittee for professional ethics under the American Institute of Certified Public Accountants.

Smith holds a master’s degree in accounting from Northeastern University Graduate School of Professional Accounting and a bachelor’s degree from the State University of New York at Albany.

Also a former KPMG partner and member of FASB’s Emerging Issues Task Force, Trott announced last August that he would be cutting his second five-year term at FASB short. FASB is made up of seven full-time members with different backgrounds: three from public accounting, two from Corporate America, one from academia, and one financial analyst.

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