Economic Optimism On Uptick
Few Companies Plan for Avian Flu Outbreak
FLORHAM PARK, N.J. and NEW YORK, Dec. 8 /PRNewswire/ -- Corporate America
is about to start spending.
Two-thirds of the companies participating in the fourth quarter "CFO
Outlook" survey plan to increase capital spending over the next twelve months,
and the average change is expected to be up 9%. Technology spending is
expected to rise at three-quarters of the surveyed companies, and almost half
(48%) will increase research & development spending, while 47% expect no
change. Technology spending will rise an average 8%, and research &
development, 5%.
Corporate spending plans appear a reflection of the increased optimism of
the 297 CFOs participating in the survey conducted by Financial Executives
international (FEI) and Baruch College's Zicklin School of Business. The CFO
economic optimism index, which had been dropping since June 2004, jumped 4.34
points to 69.69. CFO optimism about their own company reached 77.37, the
highest it's been since June 2004. The survey is conducted quarterly.
Further, the surveyed CFOs expect the Libor Interest Rate to rise from
4.4% to about 4.7% or slightly higher within the next year.
"These survey results translate to very good news for the economy," said
Burton Rothberg, Assistant Professor of Accounting at Baruch College. "Based
on our CFOs' spending plans and optimism, we think the economy should be in
stronger shape than generally expected. Further, a significant number of CFOs
feel the market is underestimating the future rise in interest rates, and in
the past, they have usually been right. Since rates usually rise into a
strong economy, this is another indication of their optimism."
Added Colleen Cunningham, FEI's President and CEO, "The anticipated jump
in corporate spending could prove to be a valuable boost to the economy in
2006. Suppliers of all types, in IT, consulting and other areas, have reason
to feel pretty confident."
CFOs expect their companies' health care costs to increase by 7.2%. While
still significantly higher than the rate of inflation, the expected increase
is actually lower than CFOs have anticipated for more than two years.
Little Planning for Avian Flu
Only 7% of the CFOs say their company is planning for a possible Avian Flu
outbreak. As examples of their preparation, one company has a disaster
recovery plan in place, which mainly relies on telecommuting. Another is
planning for "expat" evacuations. Others are analyzing potential earnings
impact.
Pension Expectations
In terms of pension fund investment returns, CFOs say they are expecting
6.99%, 8.00% and 8.31% annually over one, five and ten years. For 2006, they
expect to allocate 51% of their portfolio to domestic equities, 32% to
domestic fixed income and 10% to international. Cash, hedge funds, real
estate, and "other" make up the remaining 7%.
A Gap in GAAP?
Regarding GAAP (Generally Accepted Accounting Principles) for private
companies, two-thirds of CFOs feel there should be no difference between
public company and private company accounting principles. As one CFO stated,
"Good GAAP is good GAAP." However, the dissenting minority (30%) have strong
views: "For private companies, current GAAP rules can result in financial
statements that do not accurately reflect the true performance of the
business." And, "Some pronouncements are overly expensive to achieve with
little benefit to a private company."
Regarding Sarbanes-Oxley, 82% of CFOs think it's important for the SEC and
PCAOB to provide further guidance about Sarbanes-Oxley for more effectiveness
and cost-efficiency.
Editor's Note: More Information by Request
CFOs participating in this quarter's survey provided their views on a wide
range of topics. Contact Andrew Healy at TowersGroup, 212-354-5020,
andrewhealy@towerspr.com for CFO views and data on
* Year-two Sarbanes-Oxley costs
* PCAOB Auditing Standard Number 2
* Electronic filing of income tax returns
* PBGC premium methodology
* Registration and deregistration requirements of street and record name
holders
About the Survey
Full survey results will be available December 12 at
http://www.cfosurveys.com. For the full results prior to that, please contact
andrewhealy@towerspr.com.
This quarter, the CFO Outlook Survey, conducted by Financial Executives
International and Baruch College's Zicklin School of Business, interviewed 297
corporate CFOs electronically November 29 - December 2. CFOs from both public
and private companies and from a broad range of industries, revenues and
geographic areas, including some off-shore companies, are represented. Survey
respondents are members of Financial Executives International.
Revenue-weighted averages are provided for projected changes in capital,
technology, and R&D spending. An employee-weighted average is provided for
the projected change in health care costs.
FEI has been conducting surveys gauging the country's economic outlook
from the perspective of corporate CFOs for the past eight years.
About FEI
Financial Executives International (FEI) is the leading advocate for the
views of corporate financial management. Its 15,000 members hold policy-
making positions as chief financial officers, treasurers, and controllers.
FEI enhances member professional development through peer networking, career
planning services, conferences, publications, and special reports and
research. Members participate in the activities of 86 chapters, 75 of which
are in the United States and 11 in Canada. For more information about FEI,
visit http://www.fei.org.
About Baruch
Baruch College, founded in 1847, is a senior college of the City
University of New York. The Zicklin School of Business at Baruch College is
the largest collegiate school of business in the nation, producing graduates
who assume leadership positions in all areas of American business as well as
conduct important academic research. Baruch has one of the largest accounting
programs in the country whose graduates become practicing CPAs.
http://www.baruch.cuny.edu
SOURCE Financial Executives International; Baruch College
 back to top
Related links:
http://www.fei.org
http://www.cfosurveys.com http://www.baruch.cuny.edu
Company News On-Call:
http://www.prnewswire.com/comp/310650.html
CONTACT:
Andrew Healy of TowersGroup, +1-212-354-5020,
andrewhealy@towerspr.com; or Chris Allen of FEI, +1-973-765-1058,
callen@fei.org; or Burton Rothberg of Baruch College,
+1-646-251-4211, burt@rothberg.net
|
