FEI Members and Prospective Members
We had a miserable meeting of our Baltimore Chapter last week.
They served Crow Soup, Baked Crow and Crow a la mode. I ate it all. Every last
bite. After my presentation on various finance issues that face the profession,
one kind member asked "Who's going to win the Super Bowl?" I responded with the
great quote from Vince Lombardi, "Show me a good loser and I'll show you a
This edition of FEI Express is sponsored by Comshare. Comshare,
the leader in e-business solutions for management planning and control, brings
you a free Webcast, "Financial Consolidation: How to Close Your Books At the
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from a panel of industry experts on February 15 at 11:00 am. To register, visit
Here's what is happening around FEI.
SEC Issues Frequently Asked
Questions About Auditor Independence
Last week, the SEC clarified
some of the new rules on auditor independence. The full Q&A can be accessed
at the following link:
http://www.sec.gov/offices/account/audinfaq.htm. Some of
the highlights include the fact that the disclosures of audit fees include any
work done on the quarterly reviews during the year. The accountants'
out-of-pocket costs should be included in the audit fee disclosure. The fees
should be disclosed on an accrual basis for the applicable year, not a cash or
billed basis - DUH! Comparative year disclosure is NOT required.
New Research Report: Leverage
Competencies - The Key to Financial Leadership Success
Foundation is about to release an interesting new study that examines the
challenges financial professionals face in developing non-traditional skills to
take them to the top of their profession. Eight companies describe how they
work with their finance staff to focus less on "command and control" and more
on becoming strategic business partners.
Their approaches fall into two basic camps. The first stresses
experiential learning, hiring individuals with backgrounds in sports or the
military, because it finds that these candidates have the qualities to be team
players and future leaders. Other take a more systematic approach, stressing
internal support systems such as leadership centers, special courses and
mentoring programs. In all cases, corporate culture plays a big role in
defining training initiatives. The challenge to all efforts is making financial
managers and employees understand that developing "soft skills" such as
strategic thinking, innovation and managing risk is crucial to achieving
corporate and individual success. The study is available at the Foundation website. Just a
reminder: donors of $250 or more to the non-profit Foundation receive
complimentary copies of all Research Foundation studies.
Letter to Audit Committee
Chairs from Arthur Levitt
Chairman Levitt recently sent a letter to
the audit committee chairmen of the largest 5,000 public companies. In it,
Chairman Levitt summarizes the some of the key proposals of the recent O'Malley
panel on audit effectiveness. The letter is quite controversial, because these
proposals have not been put through the SEC's or AIPCA's due process
procedures. Most IMPORTANTLY, they do not yet represent actual rulemaking.
However, the weight and unprecedented nature of a letter from the SEC Chairman
might imply otherwise. Some describe his letter as aspirational, not
regulatory. That's an important distinction for FEI members to recognize upon
receipt of the letter. Here is a link to the letter for your measured
On Feb. 2 at 12 EST, we will hold the first of what I hope is
many live webcasts, which will include a demonstration of an Excel model that
you may find useful. Pre-register at:
http://www.financialexecutives.org/teleconf/upcoming_signup.cfm We will all log onto a
designated website and Bruce Valentine, CFO of McStain, and I will discuss and
demonstrate a share buyback model that Bruce developed over many years. He is
an incredible Excel modeler, having previously designed the M&A model that
is one of the most popular (and free) offerings in our
Brought to you by the FEI Research Foundation, this model will be
available on our web site shortly after the call. The audio portion of the
meeting (through traditional teleconferencing) will be fairly informal, with
Bruce and I reviewing the model then opening up the lines for your questions
and thoughts. But I would really like this to be the start of many
collaborative discussions, in which FEI members think through interesting
topics. I sincerely hope you join us. After registering, we will e-mail you
instructions. There is a small applet you need to install to be able to view
the session live on the web.
FEI Assesses Corporate Tax
The February meeting of FEI's Committee on
Taxation will examine the arguments that tax shelters enabled America's largest
corporations to avoid federal income taxes. This issue gained some prominence
in the closing months of the last Congress, although FEI's Hill contacts say
that this subject is on the back burner for the time being. Since FEI will be
working very hard to ensure that the long-awaited tax cut package includes
corporate/business tax reforms, we must not allow the issue of abusive tax
shelters to derail that effort.
The current tax shelter initiatives can be traced to hearings in
April 1999 and a massive Treasury Report on Tax Shelters in July 1999. Former
Assistant Secretary for Tax Policy John Talisman testified in November 1999
that "a comprehensive approach" was needed to address a growing disparity
between tax and book measures of incomes, and growth in the number and
diversity of tax avoidance devices that lacked economic substance. Former
Secretary Lawrence Summers announced that abusive tax shelters posed a "threat"
to the tax system and would be aggressively pursued by the IRS.
Then, in October 2000, Robert McIntyre of the
Institute for Taxation and
Economic Policy issued a controversial report alleging that many of
America's largest 250 companies paid little or no corporate taxes, and that
corporate tax breaks resulted in an aggregate 38% loss in tax revenues during
the period 1996-1998. The ITEP report argued that the AMT was a "shell of its
former self" and needed to be reinvigorated. Accelerated depreciation, the
R&D and oil drilling credits and stock-option deductions were all cited as
"culprits" in declining corporate tax revenues.
To address the perceptions that corporate tax avoidance and
corporate tax shelters were a "growing problem," Senators Roth and Moynihan
circulated two legislative proposals to define abusive corporate tax shelters,
establish new reporting requirements and significantly increase penalties (some
mandatory) for understatement of income due to use of an improper tax shelter.
FEI and other tax policy organizations (see, e.g.,
http://www.tei.org) went on
record in opposition of the legislative proposals because:
- Abusive tax shelters are not defined and, as written, had the
potential to capture many legitimate business enterprises;
- The new 40% penalties were unduly harsh, given Treasury's lack
of discretion to waive penalties in meritorious cases; and
- Taxpayers had less ability to rely upon professional tax
opinions/tax advisors in cases of substantial understatement of income.
Since neither Senators and Moynihan or Roth were reelected, the
future of these Committee's initiatives is uncertain.
Even though corporate tax shelters are no longer on the
"front-burner," this problem will not go away. Continued close IRS scrutiny of
so-called BOSS shelters, debt straddles, liquidating REITs, and Lease-in,
Lease-out transactions can be expected. It is also possible that political
opponents of a business tax relief package would re-ignite calls for more
hearings on the issues of corporate tax avoidance, prompt aggressive IRS
enforcement action or calls for more legislation along the lines proposed by
the Senate Finance Committee a few months ago.
GAO Puts Federal Government
Operations in "High Risk" Category Due to Staffing, Financial Controls and
Comptroller General David Walker took the unusual step of
issuing a report to Congress and President outlining the poor state of human
capital in government agencies. Many federal agencies were considered at "high
risk" for failing to deliver some essential government services and for fraud,
waste and abuse (due to inadequate ability to audit contractor-provided
functions). Lack of strategic planning, a pay and benefits structure that does
not attract technically skilled people, an aging work force and little "new
blood" due to periodic hiring freezes are all cited. Many government agencies
that interact with the business community, including the IRS, Department of
Labor, SBA, and Health and Human Services, are mentioned in the report. For
organizations like FEI, the implications of this report are that there is a
greater need than ever for associations to play a "watchdog" role to ensure
that government functions as intended, and is available to the new
administration and Congress to provide information and support on the needs of
the financial management community.
Consistent with the new administration's desire to allow
businesses to self-regulate, FEI (through its appropriate technical committees)
will urge that the Federal Government's human capital "crisis" provides a good
reason to streamline the regulatory process, with the private sector assuming
an increased role in regulating business activities. The full report can be
accessed at http://www.gao.gov.
FASB Project - Improving
Business Reporting: Insights Into Enhancing Voluntary Disclosure
just-released report studies corporate use of the many metrics other than pure
accounting results in communicating the state of the business to shareholders.
It provides a good overview of how this data is presented and used in certain
industries. You can get the
full report (free
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We have a terrific slate of conferences lined up for the
coming year. Check them out on our conferences page. There's still time to
register for our back-to-back San Francisco conferences, Driving a Successful
IPO and our Annual Treasurer's Conference.
Be sure to join us for the first teleconference of 2001:
Ernst & Young's year-end corporate reporting update. Sign up online
BusinessWeek's 10th Annual Forum
of Chief Financial Officers
February 28 - March 2, 2001
Palm Beach, FL
This exclusive conference will gather CFOs from
leading global companies. Entitled CFO as e.biz Architect, the conference will
address the critical issues facing CFOs in the new economy - from e-business to
the latest technologies. Confirmed speakers include Gary Bengier, CFO, eBay;
Robert H. Brust, Executive Vice President and CFO, Eastman Kodak Company;
Jeffrey O. Henley, Executive Vice President and Chief Financial Officer, Oracle
Corporation, Warren C. Jenson, Senior Vice President and CFO, Amazon.com Inc.;
and more! FEI members who qualify will receive a special registration rate. To
register, please call 212-512-6673 and provide your FEI identification #. For
an agenda and complete program information, please visit
(FEI Job #5144) High-visibility position within an early
stage, rapidly growing optical network company poised for significant growth.
Responsibility for domestic & international treasury operations including
debt & cash management, foreign exchange exposure, credit &
collections, long-term & short-term cash planning & bank relations.
Additionally, will lead all monitoring & evaluating of investment
strategies associated with the company's cash management. This individual will
figure into major growth plans & will have a significant opportunity for
career growth. Requires previous experience as an Assistant Treasurer or
Treasurer with a publicly traded company, ideally from the technology industry.
Bright, articulate, strong conceptual & quantitative thinker with a
''can-do'' attitude. Send cover letter and resume to Beth Nelson, Kanzer
Associates, FAX: 312-464-3719, E-MAIL: firstname.lastname@example.org.
To view more jobs, visit the
FEI Career Center.
Congratulations to John Alchin, Treasurer, Comcast Corp.,
Philadelphia, and Regina Paolillo, CFO, Gartner Group, Stamford, CT.
That's all for now,
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