Michael P. Cangemi
President and CEO
Center for
Michael P. Cangemi
FEI President and CEO
Sixth Annual Financial Reporting Conference
May 3, 2007
Baruch Financial Reporting Conference
FEI Mission
 To be the preeminent association
for financial executives via:
Networking
Providing forums
for peer
networking
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Knowledge
Alerting members
to emerging
issues
Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Advocacy
Advocating the
views of financial
executives
Ethics
Promoting
ethical conduct
Financial Executives
Research Foundation (www.FERF.org)

Independent non-profit research affiliate of FEI

Facilitate learning from other financial executives through:

–
Research publications and alerts
–
Interactive forum with peers (FELIX)
–
Distance learning with CPE
New titles:
– A Top-Down Approach to Risk Management and Internal Control
– Current Financial Reporting Trends: A Qualitative Review of SEC
Comment Letters
– Survey of Income Tax Disclosures
– What Do Users of Private Company Financial Statements Want?
– XBRL Reference Guide: Guidance for the Application and
Conversion Capabilities of XBRL
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Complexity in Financial Reporting:
A Call For Action
 “…the complexity that pervades the reporting
system – as evidenced by the volume and
detail of accounting, auditing, and reporting
standards, rules and regulations – poses a
major challenge to maintaining and
enhancing the accuracy and transparency of
financial information reported to investors,
creditors and the capital markets.”
–
FASB Chairman Bob Herz, Congressional testimony, 3/29/06
 “I want to work with the FASB, AICPA,
PCAOB, FEI and others to begin a project to
eliminate unnecessary complexity in financial
reporting ... I could see an independent body
headed by a prominent person to begin this
project.”
–
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
SEC Chief Accountant Conrad Hewitt before the 2007
Foundation of Accounting Education SEC/FASB Conference,
1/22/07
FEI’s 4-Point Plan to Combat Financial
Reporting Complexity

General agreement that investors are not well served
by complex financial reporting.

Therefore FEI recommends:
1. Stable platform while FASB and all stakeholders focus on conceptual
framework, stop proliferation of rules.
2. Adoption of meaningful class-action reform.
3. SEC and PCAOB to develop a regulatory framework that balances
investor protection with the need to maintain U.S. competitiveness.
4. Stakeholders should come together to form a “Committee on
Complexity.”
“Advocacy group FEI has also joined the fray, calling for FASB
to stop issuing new rules and instead simplify existing ones.”
-- Business Week, April 23
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
FEI Hot Button Issues in Financial Reporting
 Pension Accounting – FAS 158.
– FEI Committee on Benefits Finance and
Committee on Corporate Reporting following.
 Fair Value Accounting – FAS 157.
– FEI Committee on Corporate Reporting (CCR)
voiced concerns with complexity, reliability of Fair
Value Measurement project. We want to work
closely with FASB and other stakeholders as
further consideration of fair value continues. Jury
is out on FAS 159 … which allowed optional
election of Fair Value Option.
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
FEI Hot Button Issues in Financial Reporting
 FIN 48.
– CCR and FEI Committee on Taxation following closely.
 Sarbanes-Oxley Section 404.
– CCR and FEI Small Public Company Task Force support
movement to a more principles-based, top-down, risk-based
approach; included recommendations for further
improvements in the proposed rules; we support letting the
regulators move toward these fixes rather than amending the
legislation.
– FEI has monitored 404 costs since 2004. New report will be
released this month.
•
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Average cost for Section 404 compliance was $3.8 million during fiscal year 2005
Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Global Accounting Convergence … moving
ahead, what’s next?
Critical focus area for standard-setters and regulators

FASB/IASB “Norwalk Agreement” – commitment to development of
high quality, compatible accounting standards that could be used for
both domestic and cross-border financial reporting.
– Several current projects being addressed jointly, i.e., Conceptual
Framework, Financial Statement Presentation, Business
Combinations, more.

SEC announced in late April plans to release a proposed rule this
summer to give foreign private issuers a choice between filing in IFRS
or GAAP.

SEC also plans to issue a Concepts Release on issues relating to the
possibility of treating U.S.-based and FPIs the same by permitting U.S.
companies to also have a choice of filing in IFRS or GAAP.

EU is considering removing the reconciliation requirement from GAAP
to IFRS for U.S. companies filing internationally as well.
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Upcoming FEI events of note …
 Global Financial Reporting Convergence
Conference
September 28, 2007
Marriott Marquis Times Square, New York
 28th Annual Current Financial Reporting Issues
Conference
November 12-13
Marriott Marquis Times Square, New York
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Other important initiatives
 XBRL
– FEI’s Committee on Finance & Information Technology has shown strong
support; CCR members caution further evidence from the current voluntary
filer program should be carefully studied before considering making XBRL
mandatory.
– FERF has issued a number of educational publications on XBRL with more
in the works
 Earnings Guidance – Should it continue?
– Others have questioned if earnings guidance should continue – this is a
topic our members will consider.
 Private Companies
– Half of FEI’s members are from private companies, we have an active
Committee on Private Companies
– Closely following the joint FASB-AICPA initiative on private companies –
members question if there should be carve-outs for private companies;
others recommend reducing complexity, burden for all companies
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
U.S. Competitiveness: Problem or Paranoia?
 Treasury Secretary Henry Paulson stirring debate over U.S.
competitiveness
– March 13 event at Georgetown University
 Committee on Capital Markets Regulation formed late 2006,
issued 32 recommendations to improve U.S.
competitiveness. Co-chairs are Glenn Hubbard, Dean of
Columbia Business School, and John L. Thornton, Chairman
of the Brookings Institution.
 McKinsey Report sponsored by NYC Mayor Michael
Bloomberg and NY Senator Chuck Schumer warns of New
York’s potential decline as a global financial capital.
 U.S. share of global GDP fell to 27.7% in 2006, down from
31% in 2000. Share of the BRICs (Brazil, Russia, India and
China) rose to 11% over the same period, up from 7.8%.
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Restatements: Bad News and Good (?) …
 Public companies filed 1,876 restatements in 2006, a record
number.
 Restatements from larger companies (over $700 million
public float) declined by 20% last year.
 Micro-caps, with less than $75 million in public float, filed
42% more restatements than the prior year.
 Problem areas: backdating of stock options, measurement
and recognition of debt and stock or equity instruments,
accounting related to cash-flow statements and tax issues.
 Other drivers include:
– Second-guessing of reasonable judgments;
– Complexity of rules;
– What is material? What matters to investors?
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Emerging Issues for Financial Executives
© 2007 FEI. All Rights Reserved.
Michael P. Cangemi
President and CEO
Center for
Michael P. Cangemi
FEI President and CEO
Sixth Annual Financial Reporting Conference
May 3, 2007
Baruch Financial Reporting Conference