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CFO Survey


Economic Optimism On Uptick

Few Companies Plan for Avian Flu Outbreak

FLORHAM PARK , N.J. and NEW YORK, December 8, 2005 — 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, 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 For the full results prior to that, please contact .

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

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.



Andrew Healy
Chris Allen

Burton Rothberg
Baruch College
Zicklin School of Business