After eight tumultuous years as chairman of the Financial Accounting Standards Board, Robert Herz, 57, stepped down on October 1 (see “Herz Closes the Books on FASB Tenure“). We asked him to reflect on his time at the helm.

When comparing U.S. generally accepted accounting principles and international financial reporting standards, it seems as though some rules will be impossible to converge, such as those that pertain to LIFO inventory accounting and revaluation of property, plant, and equipment, among others.

There are a number of specific continuing differences between U.S. GAAP and IFRS that do pose challenges…but I believe that with continued [cooperation], solutions can be found. Sometimes the solutions may not just involve accounting answers. For example, in the case of LIFO inventory, the IRS is aware of this issue, and one solution might involve changes to the tax code. Regarding the revaluation of PP&E, FASB is now looking at the use of fair value for investment properties.

In 2003, you stated that FASB’s implementation of fair-value standards wouldn’t outstrip the ability of people to properly implement the concept. In hindsight, considering the liquidity crisis of 2008, do you think FASB met this challenge?

Just as many other parties did during the financial crisis, I’d [note] that we didn’t have an existing playbook for what many termed an “unprecedented” crisis. Nevertheless, I believe we dealt pretty vigorously with issuing guidance on how to deal with the challenges of
fair-value measurements and impairments of financial assets.

You spent quite a lot of time on the hot seat before Congress, especially during the crisis. Would you say that during your tenure things got better, worse, or remained unchanged with respect to political influence over accounting standards and the independence of FASB?

While I was certainly on the proverbial hot seat during the financial crisis…I actually appeared many more times in front of Congress during the debate on accounting for stock options a number of years ago. I feel that things have gotten a little bit better over the last eight years. I believe that, overall, there’s been respect for our due process and the importance of it remaining thorough, objective, and as unbiased as possible.

Note: An expanded version of this interview is available here.