Greetings! I'm writing this edition of FEI Express from Frankfurt, Germany, where the FASB and Ed Jenkins were generous enough to include me in their conference program for European SEC registrants. It was great exposure for FEI. I gave a talk on the earnings management issue in the U.S. (see below). It was an outstanding program with about 275 participants from all over Europe. I've attempted to capture the highlights for you.

I spent some time here as a young child. My dad worked for the military here in a civilian capacity while we lived in the city. It was fun to visit Frankfurt again. I ventured to Heidelberg and the Rhine Valley on Saturday after the conference, and they were both beautiful and stimulating environments. Had the great pleasure to dine with Felix Liermann, of Germany's FEI, and Helmut Schnabel, long active in IAFEI, formerly of Hoerscht, and today a member of the board of management of the company managing the assets of the Hoerscht pension plan. Helmut is a wine connoisseur of the highest caliber!

At the conference, I took some questions about our forthcoming statement on best practices in earnings press releases. Some of the SEC representatives at the conference applauded our CCR committee for addressing the issue. We expect that policy to completed and issued shortly, and we will post it on the web site and alert you to it.

Life in and around FEI continues to be fast and furious. I hope the following is useful to you.

FASB Meeting
Recently, we had our annual joint meeting of the FEI Executive Committee and the FASB. The top issues that we discussed (reflecting our priorities) with the Board included the following:

1. FASB Standard-Setting Process and Standards Overload. Mickey Alpert and Phil Ameen led the charge on this issue, but many at the table weighed in, feeling strongly that the standards are becoming too complicated to implement.
2. Business Combination Project.
3. The Liabilities and Equity Project. Bob Laux of Microsoft led the charge here, noting that under the proposal, companies that sell put options on their own stock (to decrease the cost of stock buyback programs) would have to record those options as liabilities and record gains or losses in the income statement. This procedure is contrary to the long-held accounting policy that companies should not record gains or losses on transactions involving their own stock.
4. International Convergence. Tony Cope from the FASB and John Jessup from the CCR led the discussion.

FASB European Conference
There was a slew of standard-setters at this important European conference. Jim Leisenring, Tony Cope and Gary Mueller were all presenters. Ed Jenkins chaired the two-day program. Sir David Tweedie also delivered a major speech as part of the program. This is the third year of this conference. I highly recommend the conference to our European readers. Highlights from some notable speakers are recorded below.

• Commissioner Isaac Hunt of the SEC. The Commissioner stated that the SEC's most important advances have been in the area of accounting rulemaking. He argued that the SEC has NOT been too aggressive in its rulemaking.

  He expressed support for the new FASB Business Combination Proposal and its non-amortization of goodwill, but NOT for the proposed impairment testing and measurement methodology. SEC Chief Accountant Lynn Turner expressed the same view. For the first time, I detect the possibility of delay in this proposal (hopefully, I am wrong).

  The audience asked the Commissioner about future enforcement of IASB standards. Hunt acknowledged that it is a problem and no enforcement mechanism exists. He also indicated that there is currently no clear solution.

  The audience also suggested global convergence of stock exchange listing standards. Hunt indicated that he could see that convergence in the future, but probably not soon. He noted that International Organization of Securities Commissions (IOSCO), the body that includes all the securities exchange regulators from around the world, was not close to producing convergence in listing standards with the regulators nor at the stock markets.

• Heinz-Joachim Neubuerger, CFO of Siemens AG and a member of FEI. Heinz discussed the process of how Siemens recently converted to U.S. GAAP. It took three years from initial planning to implementation and conversion to full U.S. GAAP, and Siemens re-trained 15,000 people. Its annual report expanded by 30% as a result of the changed requirements. Siemens is now listed on the NYSE. It has introduced a full-fledged half-year financial report and may go to quarterly reporting. Siemens also has voluntarily adopted Regulation FD.

  On the subject of financial reporting issues, Heinz complained at length about FAS 133. He said it was impractical and imposes an incredible need for documentation. He questioned the value of it at all. Even with the best efforts and intentions of management teams to implement 133, he doubts the process is worthwhile. He indicated that he supports expensing stock options to employees citing the oft-used quote: "If it's not compensation, what is it?" He talked about the inconsistency of local laws that require national auditors and how that inconsistency affects global markets and the EU. Overall, he believes that one auditor across all countries should be adequate.

  Furthermore, Heinz expressed concern about standards overload. He thinks the financial statements are not written with a reader/user in mind. There is too much information, the statements are too technical, and they are too different, given the local legal and tax environments. He also expressed concern that U.S. GAAP is overly influenced by home country companies (somewhat due to the lack of comments from international companies).

  Siemens faces the challenge that in 2005, all EU companies must report on the basis of International Accounting Standards. Having just converted to U.S. GAAP, the company may have to reconcile to IASB in 2005. He encouraged the standard setters to adopt one set of standards between the U.S. and IASC.

• Abby Joseph Cohen of Goldman Sachs. Abby spoke about the importance of high-quality financial statements to further the development of global capital flow. She commented on how global companies impact the process of merging the world economies into one massive, interrelated market. Essentially, good accounting practices can change the way management teams act.

  She thought that U.S. accounting standards still emphasize substance over form. But, she applauded the FASB's listening posture.

• Bob Herz of PWC. Bob, a new part-time member of the IASB, talked about the challenges of getting AUDITS up to high standards across all borders. This challenge is similar to the accounting standards convergence task. The efforts by auditors center around strengthening the International Federation of Accountants (IFAC) and initiating global peer review programs. These programs are to be put in place, as well as a compliance committee of IFAC, to determine whether the local accounting institutes have implemented the IFAC ethical and auditing standards. There are 25 global auditing firms that audit transnational companies. They audit about 90% of the market cap of public companies.
• Lynn Turner, Chief Accountant of the SEC. In his third year in a row presenting at the conference, Turner expressed his concern about the new rules on accounting for goodwill. Specifically, the impairment testing methodology is a concern. He indicated that the FASB should look at the UK Accounting Standard 11 as to its method of dealing with impaired goodwill.

  Turner gave his recommended list of initial projects for the new IASB. Namely, business combinations, financial instruments, leasing, restructuring, pension accounting and fair value accounting. He congratulated Sir David Tweedie and emphasized the importance of the new IASB's task.

• Charles Niemierer of the SEC's Enforcement Division. Niemierer talked about the SEC's current points of concern. In particular, he discussed pro forma earnings "where companies report earnings before all the bad stuff." In his opinion, the stock market and stock options continue to put excessive short-term pressure on management teams. Revenue accounting is involved in more than 50% of the enforcement cases they handle.
• Jack Ciesielski (publisher of the Analyst's Accounting Observer) and I gave presentations on the earnings management issue. I spoke from the corporate viewpoint and Jack from the analysts perspective. My presentation can be found on our web site by clicking here. I focused on the operational methods of earnings management, and the areas that have caused financial reporting abuses in the past.

Note: The views above are obviously the views of the speakers. I attempted to represent their views as objectively as possible.

Comprehensive Pension Reform Legislation Introduced
On March 14, Congressmen Portman and Cardin reintroduced popular pension reform legislation that overwhelmingly passed the House during the 106th Congress. The bill, HR 10, would among other things: 1) Increase the annual contribution limits for IRA's to $5,000; 2) Increase the annual contribution limits for 401(k) plans to $15,000; 3) Modify and redefine top-heavy rules; 4) Relax rules making it easier for small employers to offer pension plans; and 5) Increase pension portability. FEI is working with leaders in Congress to include HR 10 in one of the tax bills to be considered by the House in the coming days. Click here to show your support for the Portman/Cardin legislation.

Board Opportunity with IIA
The Institute of Internal Auditors is seeking a CFO interested in becoming a member of its Internal Auditing Standards Board. This board meets approximately four times a year to develop exposure drafts on proposed standards for internal auditing. The normal term of office is 3 years, and the CFO would ideally come from a company with an active internal audit organization. If you would like to be considered for nomination, please send your resume to Dean Krogman of FEI at dkrogman@financialexecutives.org.

Economic Survey
The Duke Fuqua School/ FEI Economic survey received some great press on CNBC last week. Thanks to all of you that participated. You really helped FEI, and the survey was widely cited in the press, including articles in the April 9 edition of the WSJ, pg. A1, A12. I hope that more of you will complete the survey if you receive it by fax!!! Here is a link to the video of Professor John Graham of Fuqua describing the recent results.

SEC Teleconference
Don't miss our May 2 teleconference with Robert Bayless, Chief Accountant of the Division of Corporate Finance. He will give FEI members an update on the pressing topics in 10K reviews. The SEC is trying to review one out of four company filings in upcoming years. With the IPO market cooling off, Corp Fin wants to review more routine filings for compliance with existing rules. Segment reporting is clearly a hot button and Robert will give us his view of problems in segment reporting. NOTE: We have instituted new international dial-in numbers, so select international readers and members may join these calls. There is no charge, but you pay for your own phone minutes (no toll-free number). Register here.

Other Upcoming Teleconferences
Be sure to check out these upcoming teleconference events as well:

• The Kinesthetic Speaker: Putting Words into Action/ How Leaders Motivate People to Act on Their Vision: Tuesday, April 10 at 2:00 p.m. EDT/ 11:00 a.m. PDT
• Networking for Success: Moderated by John Gillespie of CFOutsource LLC. Wednesday, April 11 at 12:00 p.m. EDT/ 9:00 a.m. PDT
• Corporate Governance and the Board: What Works Best. The discussion will be led by Richard M. Steinberg, a senior partner at PricewaterhouseCoopers LLP. Tuesday, April 17 at 1:00 p.m. EDT/ 10:00 a.m. PDT
• Learn What You Need to Lead: The Key to Financial Leadership Success through Leverage Competencies. Sponsored by the FEI Research Foundation. Friday, April 20th at 12:00 p.m. EDT/9:00 a.m. PDT

Sign up today for these upcoming events.

New Share Buyback Model Available
Bruce Valentine has updated his popular share buyback model to include the case of non-leveraged buybacks. Here's a link to the download.

International Newsletter, Global Update
We just published our first e-newsletter, Global Update, focused on International financial matters. I think it's outstanding and enlightening. Check it out!

Stanford Directors College
I'm speaking at this program June 4-5. It is a top quality program for corporate directors. If you are interested in attending, please contact Janice Vaughn at jvaughn@financialexecutives.org. She will provide you with a brochure.

Interesting Reading
On this trip, I was able to get some quality reading done. One incredible story that I recommend to you if you have some time is from the current issue of the New Yorker. I'm not making any statement about the politics or opinions of the story. I do tell you it is one of those pieces that is so well-written, it totally engrosses you. It is the story of a single mom in Washington, D.C. raising three kids on her own. Find it in the April 9 edition, p. 92. Written by Katherine Boo, the article is titled "About Welfare."

Making Enterprise Risk Management Pay Off
Risk management is currently a hot topic over at the FEI Research Foundation. Last month, the Research Foundation released Making Enterprise Risk Management Pay Off. Written by Thomas L. Barton, William G. Shenkir and Paul L. Walker, the book reports how five companies identify risk and implement enterprise-wide risk management strategies. Additional ordering information is located on our website.

Next on the Research Foundation's risk agenda is a survey prepared by the Research Foundation and Andersen LLP that is intended to obtain input on your company's approach to risk management. James W. DeLoach Jr. will use the results of this survey in his presentation "Enterprise-wide Risk Management as a Strategic Weapon," on May 7 at the Financial Executives Summit. In the next few days, members will receive, via e-mail, a survey prepared by the Research Foundation and Andersen LLP, intended to get your input on how your company approaches risk management. Please take the time to complete this valuable survey. For more information on the conference, visit our website.

TechKnowledge from FEI's Research Foundation
Later this month, the Research Foundation will debut TechKnowledge, a monthly electronic newsletter that will report on new IT products and services, trends in IT services and feature interviews with financial executives who have recently implemented new programs. You can sign up for the newsletter here.

Information Security Assurance: Board and Management Solutions Conference
May 15, U.S. Chamber of Commerce, Washington, D.C.

Join corporate board members, executive management, chief financial officers, chief audit executives, and chief information officers as they discuss the challenges of managing information security risks effectively. The conference will address what information security assurance means to an organization and its stakeholders and how executive management and auditors determine how much security is enough. For more information, please visit IIA's web site.

NACT Annual Meeting
Will be held May 16-18 in San Francisco. The conference will focus on treasurers in the new millennium, and the speakers and panels will emphasize current issues revolving around technology and treasurers. This is your opportunity to get up to speed on a variety of topics and learn from fellow treasurers without vendors or other outsiders being present. Register now for this unique opportunity.

FEI Logo Merchandise
Need FEI merchandise? Be sure to visit Ashford.com, where you will find new logo products for you to use for speaker gifts, to say thank you, or for your own use.

Don't Forget to Send in Your Proxy Vote
Please help us reach our quorum on the election of the board of directors by sending in your vote! Contact Barbara Chanes via e-mail at bchanes@financialexecutives.org if you have any questions.

Job Posting- Chief Administrative Officer
(FEI Job #5268) - Private oil company in Michigan seeks a Chief Administrative Officer who will be responsible for the overall administrative functions of the organization. The broader experience an individual brings to this position, the broader his/her responsibilities will be. Responsibilities include accounting, billing, development of annual operating plans and budgets, risk management, facilities, etc. Additional responsibilities could include other functional areas, e.g. human resources, information systems, legal, cash management, etc. This individual will be focused on ensuring effective, timely, responsive, and efficient administrative operations throughout the organization. He/she will be asked to improve all administrative procedures and processes to improve customer satisfaction while supporting the organization to grow revenues and improve profitability. Please respond to:

Barbara Swan, Research Director, Sullivan Associates
344 N. Old Woodward, Suite 304,
Birmingham, MI, 48009.
Phone: 248-258-0616, Fax: 248-258-2823,
Email: bswan@sullivanassociates.com.

To view other jobs, please visit the FEI Career Center.

New Member Welcome
Congratulations to Judy Curry, controller, Tupperware Corp., Orlando, and Michael Rose, vice president and controller, Hewlett-Packard Corp., Santa Clara, CA.

Exciting Chapter Presentation Coming Up
Dennis Powell, Cisco Systems' Controller, is speaking at our Portland Chapter on April 19. This will be a great opportunity to attend and learn about this high-profile organization. For more information on our Portland Chapter or this event, click here.

That's all for now,