Published: Aug 25, 2010 12:10 AM EDT
Updated: Aug 25, 2010 4:31 AM EDT

WASHINGTON (AP) — The head of the rule-setting board for corporate accounting is retiring after a tenure that included a momentous encounter with Congress in the wake of the financial crisis.

Robert Herz has decided to retire after more than eight years as chairman of the Financial Accounting Standards Board, its overseer announced Tuesday. FASB member Leslie Seidman will become acting chairman on Oct. 1. Herz's departure wasn't expected; his current five-year term runs for another two years.

In addition, the FASB will be expanded from five to seven members to help it better address future challenges, the news release said.

The changes were announced by the Financial Accounting Foundation, which oversees the administration and finances of the FASB and its counterpart for state and local government, the Governmental Accounting Standards Board.

Foundation Chairman Jack Brennan said the transition to a seven-member board is expected to occur early next year.

Securities and Exchange Commission Chairman Mary Schapiro, in a separate statement, said the move to seven members "should enhance the ability of the FASB to address issues facing the U.S. capital markets and the needs of investors."

Schapiro said Herz has been "an effective investor advocate to improve the quality of financial reporting standards around the world."

The FASB, based in Norwalk, Conn., writes the standards that guide accountants in preparing companies' financial statements. Last year, Herz lobbied to underscore its independence as a private-sector body amid intense pressure from lawmakers acting at the behest of the banking industry and others.

The pressure culminated at a House hearing in March 2009 at which lawmakers held out the threat of legislation to prod the FASB to take steps that would give relief to banks on so-called mark-to-market accounting rules.

Three weeks later, the FASB board members meeting at their headquarters issued guidelines easing the rules that force banks to value assets on the books at current prices.

Banks were forced in the aftermath of the financial crisis to write down trillions of dollars of securities tied to subprime mortgages, gutting their balance sheets even though the assets could eventually recover their value. The issue of mark-to-market rules has bubbled up again with another FASB proposal meeting opposition from the banking industry.